The dollar appears likely to remain locked within a narrow range between 105 yen and 108 yen for some time.

Recent economic statistics have all pointed to a slowdown in U.S. economic growth. Much of the uptrend in consumer spending ran out of steam last month, while housing starts fell to their lowest level in nearly a year.

A string of economic indicators over the past weeks showed that credit-tightening by the U.S. Federal Reserve has hit hard the sectors sensitive to ups and downs in bank lending rates, suggesting the robust pace of the U.S. economic growth is cooling.

The Fed’s aim to engineer a soft landing is having the desired effects on the economy.

In assessing the future direction of the dollar-yen rate, the market cannot take its eyes off developments on the U.S. economic front during and after the soft landing, in which growth slows enough to keep inflation from getting out of hand.

When the effects of the soft landing become discernible, attention will shift to stabilizing U.S. financial markets. The Fed’s option to leave interest rates unchanged will no doubt shore up U.S. share prices, and, hence, the dollar.

The dollar could turn lower later, however, when U.S. share prices enter a corrective phase amid growing signs of slower U.S. economic growth. The soft landing also means the U.S. economy will no longer outshine others.

When the U.S. economy was by far the best performer, the dollar looked attractive on the world market and excess liquidity around the world kept flowing into U.S. financial markets, more than offsetting U.S. current account deficits.

After the U.S. economy achieves a soft landing, however, the flow of capital could change, making the dollar look less attractive. The euro could then begin recouping its losses against the dollar, taking the yen higher along with it.

The dollar’s fall against the yen would be limited, however, as interest return-conscious Japanese investors will increase purchases of foreign-currency securities.

Although the long-range downward direction in the yen’s value remains unchanged, an occasional upturn in its value appears inevitable.