Summary
Risk-off yen buying emerged in late October as concerns over France's fiscal position and declines in AI-related stocks weighed on market sentiment. However, lingering concerns over energy supply amid tensions in the Middle East make it difficult to build positions in either direction, shifting the focus back to monetary policy in the US and Japan. The FOMC left rates unchanged but retained a hawkish tone, with a December hike now dependent on inflation, employment, and financial conditions. The US midterm elections are another potential driver: a Democratic sweep of both chambers would likely weigh on the USD/JPY, while Republicans retaining the Senate would likely provide support. The BOJ also left rates unchanged but maintained a hawkish tilt, including by accelerating ETF sales, laying the groundwork for a December hike. Higher oil prices continue to put downward pressure on the yen, but the prospect of intervention and US pushback against further yen weakness should keep 160 difficult to break. Near term, the 200-day moving average around 158.50 remains a key level, while the risk of yen strength pushing the pair toward the September low below 153 should also be watched.