Yen headed for a fourth weekly gain against the dollar

by Jonathan Adams
Yen

The broad strength in the yen kept a lid on the dollar, which was also on the defensive ahead of the U.S. nonfarm payrolls report due later on Friday

The yen headed for a fourth weekly gain against the dollar on Friday, after its biggest rally in nearly a year the day before, led by optimism among traders that Japan’s ultra-low rates policy may be coming to an end.

The broad strength in the yen kept a lid on the dollar, which was also on the defensive ahead of the U.S. nonfarm payrolls report due later on Friday.

Bank of Japan (BOJ) Governor Kazuo Ueda said on Thursday the central bank had a number of options on which interest rates to target once it pulls short-term borrowing costs out of negative territory.

Markets took those comments as the clearest sign yet that the Bank of Japan could soon phase out its ultra-loose monetary policy and propelled the yen to multi-month highs against a range of other currencies.

Against the dollar, the yen held firm at 144.23, having soared more than 1 per cent earlier on.

The yen added more than 2 per cent on Thursday, its biggest daily gain since January, and was likewise set to end the week with a more than 2 per cent rise. But without more impetus from the Bank of Japan, it may not have much more scope for outsized gains, stated Fiona Cincotta, City Index market strategist.

Without anything for the market to get their teeth into from the Bank of Japan, the sell-off (in the dollar) has been done and, as far as the dollar is concerned, it is almost as if it is waiting for that next catalyst and that next catalyst is going to be today, Cincotta added.

A month ago, the yen had touched a one-year low of 151.92, due to the widening gap between U.S. and Japanese borrowing costs. In the last few weeks, the outlook for U.S. interest rates has switched to one of a series of cuts next year, which helped pull the yen off those lows.

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