The yen on Friday surged on speculation that the Bank of Japan (BOJ) would revise its ultra-loose monetary policy, while the dollar edged up against most other major currencies, rising off of a seven-month low.
The yen rose to ¥129.43 before cooling to ¥127.86, down 1.11 percent from Thursday’s 2.4 percent gain against the dollar.
The moves came after Yomiuri Shimbun reported that BOJ officials would review the side effects of the central bank’s yield curve control (YCC) policy at their meeting this week.
Photo: EPA-EFE
The BOJ is an outlier in clinging to stimulus while most central banks globally are deep into rate-hiking campaigns. Signs of stickier inflation and a possible rise in Japan’s mostly stagnant wages have convinced some investors that YCC could be revised, or even abandoned, as early as next week, opening the door to a stronger yen.
“While a hike next week seems unlikely, it’s possible that the BOJ abandons YCC then in order to set up liftoff at the March or April meetings,” said Win Thin, head of global head of currency strategy at Brown Brothers Harriman. “This is the basic roadmap for tightening that’s been well-established by the Fed.”
The yield on Japan’s benchmark 10-year government bonds breached the central bank’s new ceiling on Friday, adding to pressure for the yield control policy to be scrapped or revised.
The central bank on Friday said it would conduct additional outright bond purchases tomorrow, ahead of its rate setting meeting on Tuesday and Wednesday.
“Our estimated impact of further BOJ policy adjustment points to potential JPY appreciation of up to 2.7 percent, but we believe the risk is for a larger reaction — potentially double in size,” Barclays foreign exchange analysts said in a note to clients.
Elsewhere, better-than-expected economic data out of Germany and Britain suggested both countries could escape a recession — at least for now — but the news failed to provide a lasting boost to either the euro or sterling.
The euro was down 0.19 percent against the dollar at US$1.0828, easing off a fresh nine-month high earlier in the session. Sterling rose 0.18 percent to US$1.2234.
The New Taiwan dollar on Friday rose NT$0.071 to close at NT$30.387, up 1.01 percent from NT$30.695 a week earlier.
The dollar index, which measures the greenback against a basket of currencies, including the euro and yen, edged up 0.02 percent to 102.22.
Additional reporting by staff writer and CNA
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