Yen gains amid bets over imminent BOJ rate hike

by Jonathan Adams

The dollar slipped 0.1% to 146.96 yen, approaching the five-week low of 146.48 reached on Friday

The yen gained against the dollar on Monday due to indications that the Bank of Japan might move away from negative interest rates at its upcoming policy meeting, while expectations are high for the Federal Reserve to lower rates in June.

The dollar index, which compares the currency to the yen and five other major currencies, remained close to a nearly two-month low recorded on Friday following a report showing a slowdown in the U.S. labour market, which is likely to prompt the Fed to implement policy adjustments.

The dollar slipped by 0.1% to 146.96 yen, approaching the five-week low of 146.48 reached on Friday.

The dollar index remained steady at 102.72, staying close to Friday’s low of 102.33, a level not seen since January 15.

Dollar-yen “should remain heavy this week, with bounces into 148 likely to attract sales as expectations continue building that the BOJ might tweak policy (on) 19th March,” Westpac strategists wrote in a note to clients.

Meanwhile, the dollar index “looks vulnerable to a deeper setback,” and could test support at 101 this week, the note stated.

A growing number of Bank of Japan policymakers are warming to the idea of ending negative rates at their March 18-19 gathering, sources told Reuters, amid expectations for hefty pay hikes from Japan’s largest firms when results of this year’s annual “shunto” wage negotiations are due on Wednesday.

In other news, the BOJ is reportedly contemplating a new quantitative monetary policy framework to replace the current yield curve controls.

In contrast, traders are betting with a 73% probability that the Fed will reduce rates by the end of its meeting on June 11-12, as the softness in the jobs data from Friday supported Fed Chair Jerome Powell’s earlier remarks that policymakers were close to having the confidence needed to lower rates. The next Fed meeting is scheduled for March 19-20.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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