The Japanese currency began the week by scaling a seven-month high of 141.675 per dollar
The yen was choppy on Thursday after a sharp decline in the earlier session in a volatile week that has left sentiment fragile as investors weigh the unwinding of popular carry trades and ponder the rate path Japan’s central bank is likely to take.
The yen was up 0.4% at 146.02 per dollar, having declined 1.6% on Wednesday after the BoJ’s Deputy Governor Shinichi Uchida played down the possibility of a near-term hike in interest rates.
The Japanese currency began the week by scaling a seven-month high of 141.675 per dollar as weak U.S. jobs data last week stoked recession concerns and roiled investors.
A surprise hike from the Bank of Japan last week also led investors to bail out of carry trades, in which traders borrow the yen at low rates to invest in dollar-priced assets for higher returns, helping to lift the yen.
A summary of opinions voiced at the Bank of Japan’s July policy meeting showed on Thursday that some board members called for the need to keep raising interest rates with one saying they should eventually be increased to at least around 1%.
The contrasting opinions from the summary and Uchida on whether the Bank of Japan will continue to hike rates or pause as a result of market volatility, underscores the delicate task facing the central bank and will likely keep investors skittish.
While the BOJ may have paused for now, it is likely to continue its journey towards normalising policy in the coming months, according to Vasu Menon, MD of investment strategy at OCBC.
It may be too early to pop the champagne as markets remain vulnerable to the risk of negative news flows and other global uncertainties, Menon added.
