Yen slides as BOJ governor steers clear of rate hike talk
Updates moves as of 1127 GMT
By Linda Pasquini and Wayne Cole
LONDON/SYDNEY, Sept 20 (Reuters) -The yen weakened on Friday after the Bank of Japan signalled it was in no rush to raise interest rates again after keeping them steady at 0.25% as widely expected.
The dollar rose 1.2% to 144.32 yen JPY=EBS, reaching its highest level in a little over two weeks, as Governor Kazuo Ueda said the BoJ could afford to spend time eyeing the fallout from global economic uncertainties.
"Our decision on monetary policy will depend on economic, price and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts are achieved, we will raise interest rates and adjust the degree of monetary support accordingly," Ueda said at his post-meeting press conference.
"We had expected that Ueda would warm up to another rate hike," said Niels Christensen, chief analyst at Nordea Bank.
The rise in the dollar against the yen showed relief that Governor Ueda, during his speech, did not really touch rates policy, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.
"It seems like he focused on economic data and tried to avoid answering market comments. He was hiding his hawkishness," Omori said, adding that the dollar's rise against the yen was likely temporary.
Markets were also digesting data on Japanese consumer prices, out on Friday, which showed core inflation ticked up to 2.8% in August, while overall inflation hit 3.0%.
It has been a tough week for the Japanese currency, with the euro gaining 3.2% to 161.05 EURJPY= as speculators booked profits on recent long yen positions.
The euro also firmed to $1.1154 EUR=EBS, up 0.7% on the dollar for the week and within striking distance of the August peak of $1.1201. A break there would target a July 2023 top of $1.1275.
DOLLAR DECLINE
Much of the rest of the world is heading in the other direction to Japan, although a much-anticipated rate cut by China's central bank has proved elusive. China unexpectedly left benchmark lending rates unchanged at the monthly fixing on Friday.
China has been hinting at other stimulus measures, enabled in part by the U.S. Federal Reserve's aggressive easing that shoved the dollar to a 16-month low on the yuan CNY=.
Major state-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 big event of the week remained the Federal Reserve's 50 basis points rate cut on Wednesday.
Markets imply a near 44% chance the Fed will cut by another 50 bps in November and have 72 bps priced in by year-end. Rates are seen at 2.85% by the end of 2025, which is now thought to be the Fed's estimate of neutral. 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 Aussie surpassing $0.6800 AUD=D3.
The U.S. dollar index =USD gained slightly at 100.84 and just above a one-year low.
Sterling was another gainer after the Bank of England kept rates unchanged on Thursday, while its governor said it had to be "careful not to cut too fast or by too much".
The pound was up 1.25% for the week so far at $1.32885 GBP=D3, supported by Friday's solid retail sales figures, having hit its highest since March 2022.
It also hit its strongest against the euro in more than two years, with the common currency dropping to as low as 83.81 pence. EURGBP=D3
Yen carry trade positions https://tmsnrt.rs/3XNSk8o
Reporting by Wayne Cole in Sydney and Linda Pasquini in London; Additional reporting by Vidya Ranganathan in Singapore and Kevin Buckland in Tokyo,
Editing by Christopher Cushing, Kim Coghill, Michael Perry
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
