Profit-taking capped the dollar’s gains against the yen on Friday (20th), but the dollar still closed higher and still posted its biggest weekly gain since early December last year. The yen remained on the defensive after the Bank of Japan chief reiterated that he would maintain ultra-loose monetary policy.
Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), said in a speech at the World Economic Forum held in Davos, Switzerland that the Bank of Japan will continue to implement the current “ultra-loose” monetary policy and achieve 2% in a stable and sustainable manner inflation target. As of late Friday, the dollar rose 0.88% against the yen, still the biggest gain since Jan. 4; it rebounded 1.32% from a seven-month low on Monday, the biggest gain since the week ended Dec. 9 last year.
John Doyle, vice president of trading at Monex USA, pointed to market volatility on Friday and said Asia will usher in the Lunar New Year holiday next week. “At 3 p.m. US time, we just saw some positions being liquidated ahead of the holiday,” he said. Still down 1.6%.”
Speculators are betting that the Bank of Japan, the last major bank still operating an easy monetary policy, is gradually shifting towards a tightening stance. That has pushed the yen back, with the dollar depreciating against the yen by 14% over the past three months. USD/JPY once rose to 130.62 yen, and was last up 0.88% at 129.56 yen.
In addition, data released by Japan on Friday showed that the core consumer price index (CPI) rose 4% year-on-year in December, double the target of the Bank of Japan.
Michael Hewson, chief strategist at CMC Markets, said that Japan is facing an inflation problem that has never been seen in nearly 40 years. In his view, the done deal, the dollar will go lower against the yen, the question is just how fast to go lower.
Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, sees the dollar returning to the 130-135 yen range. He believes that by knowing the trend of U.S. Treasury yields, you can get a little idea of the trend of the dollar against the yen.
The dollar has been largely on the defensive this week as a string of data on consumer spending, business activity and inflation from major economies highlighted the increasingly fragile growth outlook for the U.S. economy. U.S. Treasury yields, which had trended lower throughout the month, were higher on Thursday and Friday.
In late U.S. trade, the ICE U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, was down 0.06% at 101.99. The U.S. dollar index closed in black for the week. The dollar index has fallen about 1.4 percent so far in January, after falling nearly 8 percent in three months in the fourth quarter of last year, when investors considered the possibility that the Federal Reserve would slow the pace of rate hikes.
With a slew of important data coming out, investors are awaiting the Fed’s meeting next month to see whether it will maintain the same pace of rate hikes as it did last December after raising rates by 2 yards (50 basis points) or slow down further to a 1 yard hike (25 basis points). The market is currently eagerly anticipating that the tightening policy in the United States will end as soon as possible.
Economists at ING said the close watch on U.S. economic growth meant the dollar remained vulnerable to economic data releases as markets continued to cut Fed rate expectations.
Meanwhile, the euro was up 0.25% at $1.0856 and sterling was little changed at $1.2397 after UK data showed retail sales unexpectedly fell in December as the country’s consumers shopped less but spent more.
In the encryption space, bitcoin surged to its highest level since September last year in late trading, up 5.6 percent at $22,270.
As of Saturday (21st) around 8:00 Taiwan time Price:
The dollar index was at 101.9966. -0.0747% The euro was trading at $1.0856 to the euro. +0.2401% GBP/USD was trading at $1.2397. +0.0484% The Australian dollar is trading at 0.6967 US dollar to the US dollar (AUD/USD). +0.8395% The U.S. dollar was trading at 1.3377 Canadian dollars to the U.S. dollar. -0.6683% The dollar was trading at 129.56 yen per dollar. +0.8956%
