Japanese yen slumps on dovish BOJ, Asia FX hit by Fed fears By Investing.com

Investing.com – The Japanese yen fell sharply on Friday after the Bank of Japan largely maintained its dovish stance, while the broader Asian currencies were pressured by renewed fears that the Federal Reserve could raise interest rates.

The Asian currency was the worst performer of the day, falling 0.7% to its lowest level in one week after the Bank of Japan said it would pursue policies.

It rose after the move, and came close to testing the upper limit of 0.5%, as the Bank of Japan said it would “patiently” maintain its accommodative policies for the time being.

But the bank also raised its inflation forecast for the 2023 fiscal year, while separate data showed more-than-expected growth in April, back toward 40-year highs. Rising inflation could put pressure on the Bank of Japan for possible tightening later this year, although the bank scrapped those expectations by announcing a one-year review of monetary policy.

Broader Asian currencies moved in a flat-to-low range on Friday, but were set to end the week lower as investors were widely anticipated by the Federal Reserve next week.

It rose 0.2%, rebounding slightly from a one-month low hit earlier in the week, while adding 0.1% to data showing a smaller-than-expected decline in March.

It fell 0.2% as a Reuters poll showed interest rates were widely expected to remain steady next week.

The pair rose about 0.2% each, but were heading for weekly losses after weak signs on the US economy.

Data showed on Thursday that the world’s largest economy in the first quarter, amid pressure from high inflation and interest rates. The dollar was largely flat after the data.

But it was still recovering in overnight trading as other readings indicated higher than expected in the first quarter, while it also fell unexpectedly.

Signs of sticky inflation, along with strength in the labor market, are giving the Fed more impetus to raise interest rates. Markets are now unsure of the course of monetary policy after the May meeting, given that the Fed has not given any signs that it plans to gradually ease its hawkish stance.