SINGAPORE – The yen got a boost on Thursday on expectations that the Bank of Japan will review the side effects of its monetary easing, while the dollar paused its retreat and wobbled near a seven-month low against the euro ahead of US inflation data later in the day.
The Japanese yen jumped nearly 0.7 percent to 131.58 per dollar in early Asia trade, following a Yomiuri report that the BOJ will review the side effects of its monetary easing at next week’s policy meetings and may take additional steps to correct distortions in the yield curve. The yen last bought 131.92 per dollar.
The news follows the BOJ’s surprise tweak in December to its bond yield control, though the move has failed to address distortions caused in the bond market from the central bank’s massive bond buying.
“The report is likely to add on to the (yen) optimism,” said Saktiandi Supaat, regional head of FX research and strategy at Maybank.
“The upcoming BOJ meeting … expectations of upward revisions to the bank’s inflation forecast and the forthcoming announcement of a new BOJ governor, will likely feed into the expectation of a policy shift.”
Elsewhere, the dollar stood cautiously steady ahead of the closely watched US inflation data out later on Thursday, which will provide more clarity on how much inflation in the world’s largest economy has tamed and on the Federal Reserve’s rate-hike path.
Sterling was little changed at $1.21505, while the US dollar index crept 0.02 percent higher to 103.14, though remained not far off its seven-month low of 102.93 hit earlier in the week.
Expectations that the Fed may be nearing the end of its aggressive monetary policy tightening campaign and that it may not have to raise rates as high as previously feared, has already sent the greenback tumbling to fresh lows against its peers this year. – Reuters
