Dollar strengthens versus yen as BOJ strikes cautious stance on rate hikes
Dollar hits two-week high versus yen
Dollar index gains ground after Fed's giant rate cut
Sterling strengthens after British retail sales data
Chinese yuan rises after lending rates left unchanged
Adds analyst quote, updates prices throughout
By Chibuike Oguh and Linda Pasquini
NEW YORK/LONDON, Sept 20 (Reuters) -The dollar strengthened against the yen on Friday, hitting its highest level in two weeks, after the Bank of Japan left interest rates unchanged and indicated that it was not in a hurry to hike them again.
The BOJcould afford to spend time eyeing the fallout from global economic uncertainties, Governor Kazuo Ueda said in a press conference following the central bank's move, adding that its monetary policy decision will be based on "economic, price and financial developments." The BOJ kept rates steady at 0.25%, a move that was widely expected.
The dollar rose as high as 144.50 yen JPY=EBS, reaching its highest level since early September. It was last up 0.92% at 143.92. The euro also strengthened against the yen, gaining 0.93% to 160.59 EURJPY=EBS.
"We're seeing a little bit of consolidation in markets that got the dollar-yen move, which has been quite significant in the past few days since the Fed," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto, referring to the Federal Reserve'sdecision on Wednesday to cut interest rates by half a percentage point.
"The statement sounded perhaps a little bit more cautious than markets would have liked given the assumption that we will see another rate cut from the Bank of Japan before Christmas. I still think that's likely."
The dollar has traded in a choppy fashion since the Fedkicked off its monetary policy easing cycle.
Against the dollar, however, the euro weakened 0.01%to $1.115925. The U.S. dollar index =USD, which measures the greenback against major currencies, gained slightly to 100.75 and just above a one-year low.
"There's a sense in the market that the Bank of Japan doesn't need to hike rates and also we're turning more to thepolitical situation in Japan," said Adam Button, chief currency analyst at ForexLive in Toronto.
Markets imply nearly a 49% chance the Fed will deliver another 50-basis-point rate cut in November and have priced in 74.8 bps of cuts by the end of this year. The Fed's policy rate is expected by the end of 2025 to beat 2.85%, which is now thought to be the Fed's estimate of the neutral rate. FEDWATCH
That dovish outlook has bolstered hopes for continued U.S. economic growth and sparked a major rally in risk assets. Currencies leveraged to global growth and commodity prices also benefited, with the Australian dollar reaching as high as $0.68285 AUD=D3. It was last down 0.13%to $0.68060.
"It runs counter-intuitiveto what we've seen in the market, with a big cut from the Fed and the Bank of Japan holding rates. I think that the message really from dollar-yen is that the market is feeling better about global growth," Button said.
China unexpectedly left benchmark lending rates unchanged at the monthly fixing on Friday. Beijing has been hinting at other stimulus measures, enabled in part by the Fed's aggressive easing that shoved the dollar to a 16-month low against the yuan CNY=.
Major Chinesestate-owned banks were seen buying dollars in the onshore spot foreign exchange market on Friday to prevent the yuan from appreciating too fast, two people with knowledge of the matter said. The dollar CNH= weakened 0.23% to 7.043versus the offshore Chinese yuan.
The Bank of England kept rates unchanged on Thursday, with its governor saying the central bank had to be "careful not to cut too fast or by too much."
The pound was up 0.24% at $1.33180 GBP=D3, supported by the release on Friday of strong British retail sales data.
Currency bid prices at 20 September 06:46 p.m. GMT | |||||||
Description | RIC | Last | U.S. Close Previous Session | Pct Change | YTD Pct | High Bid | Low Bid |
Dollar index | =USD | 100.74 | 100.67 | 0.07% | -0.62% | 101.01 | 100.41 |
Euro/Dollar | EUR=EBS | 1.1162 | 1.1162 | -0.01% | 1.11% | $1.1181 | $1.1136 |
Dollar/Yen | JPY=D3 | 143.84 | 142.62 | 0.9% | 2.03% | 144.485 | 141.84 |
Euro/Yen | EURJPY= | 1.1162 | 159.19 | 0.85% | 3.16% | 161.15 | 158.43 |
Dollar/Swiss | CHF=EBS | 0.8506 | 0.8478 | 0.35% | 1.09% | 0.8516 | 0.8453 |
Sterling/Dollar | GBP=D3 | 1.3314 | 1.3286 | 0.22% | 4.63% | $1.3341 | $1.3269 |
Dollar/Canadian | CAD=D3 | 1.356 | 1.3557 | 0.04% | 2.31% | 1.359 | 1.3543 |
Aussie/Dollar | AUD=D3 | 0.6806 | 0.6815 | -0.13% | -0.18% | $0.6829 | $0.6784 |
Euro/Swiss | EURCHF= | 0.9494 | 0.9462 | 0.34% | 2.22% | 0.9503 | 0.9447 |
Euro/Sterling | EURGBP= | 0.838 | 0.8401 | -0.25% | -3.32% | 0.8407 | 0.8382 |
NZ Dollar/Dollar | NZD=D3 | 0.6237 | 0.6242 | -0.06% | -1.29% | $0.6258 | 0.621 |
Dollar/Norway | NOK= | 10.4989 | 10.4814 | 0.17% | 3.59% | 10.561 | 10.4482 |
Euro/Norway | EURNOK= | 11.7197 | 11.699 | 0.18% | 4.42% | 11.7702 | 11.681 |
Dollar/Sweden | SEK= | 10.1778 | 10.1512 | 0.26% | 1.1% | 10.2309 | 10.138 |
Euro/Sweden | EURSEK= | 11.3604 | 11.338 | 0.2% | 2.11% | 11.3988 | 11.3326 |
Graphic-Yen carry trade positions https://tmsnrt.rs/3XNSk8o
Reporting by Chibuike Oguh in New York, Wayne Cole in Sydney and Linda Pasquini in London;
Editing by David Evans
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