The yen hovered near a five-month low against the dollar yesterday, as the US Federal Reserve’s hawkish messaging contrasted with the Bank of Japan’s (BOJ) cautious approach to further policy tightening.
The yen traded at 157.765 per US dollar as of 6am GMT, edging up 0.1 percent from Thursday, but still close to that session’s low of 158.09 per dollar, the yen’s weakest level since July 17.
Japan’s currency got little respite from a fresh warning by the country’s minister of finance that the government “has been alarmed by foreign exchange developments ... and will take appropriate action against excessive moves.”
Photo: AFP
A summary of opinions from the BOJ’s December policy meeting released yesterday showed some officials becoming more confident about a near-term rate increase, while others remained wary amid uncertainties over the trend of wages and the policies of US president-elect Donald Trump’s incoming administration.
After the central bank’s decision last week to hold rates steady, BOJ Governor Kazuo Ueda said that it would take “considerable time” to fully gauge the outlooks for wages and overseas economies, particularly the US.
By contrast, US Fed Chair Jerome Powell earlier this month said that US central bank officials “are going to be cautious about further cuts” following an expected quarter-point rate reduction.
Trump’s proposed looser regulation, tax cuts, tariff hikes and tighter immigration policies are seen as pro-growth and inflationary by economists.
The dollar is on track for a 5.5 percent gain this month against the yen, and an 11.8 percent advance for the year.
“The upward trend is strong, but there’s a feeling that the strong dollar-weak yen movement we’ve seen to now is overdone and there’s the risk of pullbacks,” Mizuho Securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.
“There’s also the possibility of firmer intervention warnings from Japanese officials,” they said.
The US dollar index, which measures the currency against the yen, euro, sterling and three other major rivals, ticked up 0.08 percent to 108.16. It has been essentially in a holding pattern near 108 all week, with many traders on holiday around Christmas and the New Year.
The index is up 2.2 percent for the month. It has rallied 6.7 percent so far this year.
The euro eased 0.13 percent to US$1.04085, heading for a 1.6 percent decline this month. The UK pound edged down 0.07 percent to US$1.2519 on the day, on track for a 1.7 percent slide for the month.
South Korea’s won dropped to a fresh 16-year-low of 1,486.7 per dollar, with the country’s acting president facing an impeachment vote.
The Chinese yuan was set to end the week near a 13-month low against the dollar, trading at 7.2988 per dollar in the onshore market, right on the cusp of the closely watched 7.3 level. The currency has suffered under the threat of additional US tariffs on Chinese goods under Trump.
Leading cryptocurrency bitcoin added 0.5 percent for the month to US$96,165, down from a record high of US$108,379.28 on Tuesday last week. It has surged about 126 percent so far this year.
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