Tomoko Fujii Rate Quotations

Short-term rate expectations remain the single most important factor for dollar/yen,

Some market participants are beginning to be concerned about the risks of an earlier rate hike.

The trade surplus figures showed strong exports and domestic demand. This shows the economy is robust enough to withstand a rate increase later this year, supporting the yen.

Expectations of further Fed rate increases haven't peaked yet, while rate hikes by the Bank of Japan are a long way off. Along with Japanese investors continuing enthusiasm for overseas assets, that will likely push up the dollar in coming weeks.

The markets have already priced in at least one rate hike and are beginning to price in the second rate hike by year-end. Combined with the steady recovery of the Japanese economy, those expectations are likely to push up the yen.