© Reuters. FILE PHOTO: Banknotes of the Japanese yen and the US dollar are shown in this illustration taken on March 10, 2023. REUTERS/Dado Ruvik/Illustration
Written by Karen Britel and Ian Withers
NEW YORK (Reuters) – The yen fell against the dollar on Friday after Reuters reported that the Bank of Japan is leaning toward keeping its key yield control policy unchanged next week, ahead of a busy week of central bank meetings involving the United States and Europe.
Bank of Japan policymakers would like to scrutinize more data to ensure wages and inflation continue to rise before changing policy, said five sources familiar with the matter. The report added that there is no consensus within the Central Bank and the decision may be soon.
With inflation exceeding the BoJ’s target for more than a year, markets have been simmering in speculation that the central bank may adjust yield curve control as early as the July 27-28 meeting.
“All expectations are for them to keep yield curve control as is and no changes in rates, but maybe a little update in their inflation outlook,” said Edward Moya, senior market analyst at OANDA in New York.
Moya added, however, that “the chances of us getting a surprise should still be on the table.” “The BoJ is likely to be a major market-moving event because the BoJ is running out of time to prepare a policy shift.”
Data earlier on Friday showed Japan’s core inflation rate rose to 3.3%, matching median market expectations but still ahead of the Bank of Japan’s 2% target.
The dollar last rose 1.26% to 141.83 yen, after earlier reaching 141.95, the highest level since July 10. And it is trading below the level of 145.07 which it recorded on June 30, which is the highest level since November 10.
The dollar is on track for its best weekly percentage gain against the Japanese currency since October, at 2.22%.
A sharp move in the yen on Friday could prompt Japan’s finance ministry to make more public comments to try to support the currency, said Kenneth Brooks, head of corporate foreign exchange and interest rate research at Societe Generale (OTC:).
“It puts more pressure back on the Treasury Department,” Brooks said.
Japan’s chief currency diplomat, Masato Kanda, said on Friday that the Japanese authorities will study all options to deal with excessive volatility in the currency market.
Fed Focus
Central bank meetings from the US and Europe are also scheduled for next week, when both the Federal Reserve and the European Central Bank are expected to raise interest rates by 25 basis points.
Investors will focus on comments from Federal Reserve Chairman Jerome Powell after the US central bank’s interest rate decision on Wednesday for any clues as to whether further rate hikes are likely.
Moya points out that Powell is likely to “keep electives on the table — there’s no reason for them to stick to September when you have two inflation reports coming after next week’s meeting.”
Fed fund futures traders are pricing in 33 basis points of additional tightening this year with rates expected to peak at 5.41% in November.
“We could see another rate hike in this cycle, but any dovish pivot seems a long way off,” said Christian Sherman, US economist at DWS.
The dollar index – which tracks the greenback against six major peers – was up 0.41%, at 101.16. The index was on track for a weekly gain of 1.20%, its biggest rise in two months.
The euro fell 0.17 percent against the dollar to $1.1111.
The pound fell for the sixth day against the dollar – the longest period of daily losses since last September – and finally fell by 0.20% at $1.2841.
It bounced briefly earlier in the session on data showing that UK consumer spending was stronger than expected in June.
The pound is heading for a weekly decline of about 1.86%, which is the largest decline since early February.
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Coin offer prices at 10:10 am (1410 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
previous change
a class
Dollar Index 101.1600 100.7700 +0.41% -2.251% +101.1800 +100.7100
EUR/USD 1.1111 USD 1.1130 -0.17% + 3.70% + 1.1145 USD + 1.1111 USD
USD/JPY 141.8300 140.0700 +1.26% +8.18% +141.9450 +139.7500
EUR/JPY 157.58 155.88 +1.09% +12.32% +158.0400 +155.6000
USD/CHF 0.8662 0.8668 -0.06% -6.32% +0.8672 +0.8644
GBP/USD $ 1.2841 $ 1.2868 -0.20% + 6.19% + $ 1.2903 + $ 1.2817
USD/CAD 1.3219 1.3172 +0.38% -2.42% +1.3222 +1.3154
AUD/USD $0.6723 $0.6779 -0.83% -1.37% + $0.6788 + $0.6723
EUR/CHF 0.9622 0.9646 -0.25% -2.76% +0.9651 +0.9619
EUR/GBP 0.8651 0.8647 +0.05% -2.18% +0.8679 +0.8635
0.6177 NZD 0.6233 -0.89% -2.71% + 0.6240 NZD + 0.6177 NZD
dollars / dollars
Dollar / Norway 10.1020 10.0820 +0.15% +2.88% +10.1030 +10.0300
Euro / Norway 11.2230 11.2064 +0.15% +6.95% +11.2285 +11.1499
Dollar / Sweden 10.4088 10.3417 +0.49% +0.01% +10.4092 +10.3287
Euro / Sweden 11.5660 11.5095 +0.49% +3.69% +11.5758 +11.5060
