Please try another search
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
By John McCrank
NEW YORK (Reuters) -The yen surged on Friday, adding to earlier gains on speculation the Bank of Japan (BOJ) will 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 was up 1.06% against the greenback at 127.92 yen at 3:00 p.m. EST (2000 GMT). The move added to a 2.4% gain on Thursday after the Yomiuri newspaper said BOJ officials would review the side effects of the central bank's yield curve control, or YCC, policy at their meeting next week.
The BOJ is an outlier in clinging to stimulus while most central banks globally are deep into rate-hiking campaigns. But 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 said on Friday it would conduct additional outright bond purchases on Monday, ahead of its Jan. 17-18 rate setting meeting.
"Our estimated impact of further BoJ policy adjustment points to potential JPY appreciation of up to 2.7%, but we believe the risk is for a larger reaction – potentially double in size," Barclays (LON:BARC) 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 last down 0.2% against the dollar at $1.0828, easing off a fresh nine-month high earlier in the session. Sterling rose 0.12% to $1.22275.
The dollar index, which measures the greenback against a basket of currencies, including the euro and yen, edged up 0.02% to 102.22.
The dollar index had hit it lowest level since June 6 earlier in the session, following data on Thursday that showed cooling U.S. inflation, firming up expectations the Federal Reserve will slow the pace of its interest rate hikes.
"Hikes of 25 basis points will be appropriate going forward," Philadelphia Fed president Patrick Harker said in a speech to a local group in Malvern, Pennsylvania, on Thursday.
Goldman Sachs (NYSE:GS) strategists said the December inflation data likely sealed the deal on a shift to 25 basis point hikes in February but cautioned it was too early in the process for central banks to feel comfortable declaring victory.
The University of Michigan Surveys on Friday showed that U.S. consumers believe price pressures would ease back to levels seen in the spring of 2021 over the next year.
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.