The dollar advanced against the yen, following a volatile session the previous day that saw the dollar decline 1.24% to the lowest this year before recovering all its losses after the consumer price data
The dollar traded near a four-week high versus the euro on Thursday after indications of some stickiness in U.S. inflation bolstered expectations that the Fed would avoid a super-sized interest rate cut next week.
Meanwhile, a quarter-point rate cut from the ECB is widely expected later in the day, with investors anxious for hints on how soon the monetary authority will cut again.
The dollar advanced against the yen, following a volatile session the previous day that saw the dollar decline 1.24% to the lowest this year before recovering all its losses after the consumer price data.
Early on Wednesday, BoJ board member Junko Nakagawa reinforced the central bank’s tightening bias by saying low real rates leave room for further rate hikes.
On Thursday, fellow Bank of Japan board member Naoki Tamura, known as a policy hawk, said the market’s expected pace of tightening could be too slow – comments that helped mitigate yen losses.
The speeches are a sign of an important shift in communication style at the bank, as per Shoki Omori, chief Japan desk strategist at Mizuho Securities.
The BOJ is trying to get markets to price in a hike using forward guidance instead of using media outlets, which is a good change, he added.
But markets are not used to it, so that is one reason why yen volatility has increased in recent weeks, he said.
The dollar gained 0.31% to 142.805 yen as of 0505 GMT, after earlier adding 0.41%. It slipped as low as 140.71 for the first time since December 28 in the previous session, following Nakagawa’s comments.
The rebound in the dollar-yen pair has left signs of downside capitulation at the 140.71 low, opening the way for a recovery back towards 145.50, according to Tony Sycamore, an analyst at IG.
