HONG KONG- The yen extended its decline on Monday and the euro and sterling came under pressure, with investors awaiting Federal Reserve chair Jerome Powell’s remarks later in the day and other central bank policymakers this week for monetary policy clues.
The dollar climbed slightly on the yen to as much as 119.3 yen challenging the six-year peak of 119.39 touched on Friday. The dollar finished last week 1.6 percent higher versus the Japanese currency.
Analysts at CBA said they thought moves in the pair could slow this week, but they predict the dollar will climb further on the yen in the coming months as the gap between US and Japanese interest rates widens.
“Japan’s inflation dynamic is very different to that experienced in other major economies we monitor, As a result, an exit from the ultra-easy monetary policy by the Bank of Japan remains a long way off in our view,” they said.
In contrast, the US central bank raised its key interest rate by 25 basis points last week for the first time since the pandemic.
Traders’ focus is now firmly on the speed and size of future rate hikes and the height of their eventual peak, as policy makers try to curb soaring inflation.
A series of speeches by Fed policymakers this week, kicked off by Powell on Monday, could provide some clues. At least one Fed speaker is due each day this week and Powell himself making another appearance on Wednesday.
Markets will be watching to see the attitude of more dovish Fed policymakers, said analysts at Barclays in a note to clients, saying that if they should sound hawkish it would reinforce expectations of more aggressive rate rises early in the Fed’s path to higher rates.
