Author: Kevin Buckland
TOKYO (Reuters) – The yen hovered near a five-month low against the dollar on Friday as tough messages from the U.S. central bank contrasted with the Bank of Japan’s cautious approach to further policy tightening.
The yen was trading at 157.725 per dollar as of 00:30 GMT, up 0.1% from Thursday but still close to a session low of 158.09 per dollar, the yen’s weakest level since July 17.
A summary of opinions from the BOJ’s December policy meeting, released on Friday, showed some officials growing more confident about a near-term interest rate hike, while others remained cautious amid uncertainty over wage trends and the policies of the incoming Donald Trump administration.
Inflation data for Tokyo in December, also released on Friday, supports further rate hikes.
BOJ Governor Kazuo Ueda said last week, after the central bank kept rates steady, that it would take “considerable time” to fully assess the outlook for wages and overseas economies, particularly the United States.
In contrast, Fed Chairman Jerome Powell said earlier this month that U.S. central bank officials “will be cautious about further cuts” after an expected quarter-point rate cut.
Economists believe that Trump’s looser regulation, tax cuts, tariff hikes and stricter immigration are boosting growth and fueling inflation.
The dollar is on track to rise 5.4% this month against the yen, and rise 11.9% for the whole year.
“The uptrend is strong, but there is a sense that the strong dollar-weak yen move we have seen now is overdone and there is a risk of a pullback,” Mizuho (NYSE:) securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.
“There is also the possibility of more stark warnings of intervention by Japanese officials.”
On December 20, both Japan’s finance minister and its top FX diplomat said in separate media briefings that officials were alarmed by the “excessive” currency moves and were prepared to take “appropriate measures.”
which measures the currency against the yen, euro, sterling and three other major rivals, was steady at 108.09 and has essentially been in a holding pattern around that level all week. For a month, it grew by 2.2%.
Many traders are on vacation around Christmas and New Year.
The euro was unchanged at $1.0421, down 1.5% so far in December. Sterling was little changed at $1.25275 on the day, down 1.7% on the month.
Leading cryptocurrency bitcoin was steady at $95,660, slipping 1.2% this month, but after hitting a record high of $108,379.28 on Dec. 17. So far this year, it has grown by about 125%.
