Yen becomes choppy after BOJ remains dovish, dollar edges down By Stocksak

© Stocksak. FILEPHOTO: A graph of the currency exchange rate is shown with U.S. dollars banknotes and Japanese Yuen in this illustration taken June 16, 2022. REUTERS/Florence Lo/Illustration

By Rae Wee

SINGAPORE, (Stocksak), – While the yen stumbled after Friday’s Bank of Japan maintained its ultra low interest rates and dovish posture, the dollar struggled with overnight gains as Fed expectations increased for a pivot.

The yen fell 0.4%, to a session low at 146.90 per USD in the wake of the central banks’ decision. However, the losses were reversed later to make a marginal profit. It was last at 146.10 dollars, which was 0.13% higher.

As expected, the BOJ maintained its -0.1% short-term rate target and pledged to guide the 10-year yield around 0%. However it raised its inflation forecasts.

Christopher Wong, OCBC’s currency strategist, stated that “the choppy price movement suggests that markets were hoping to see a tweak in BOJ’s policies and also reflects an upward revision of the core CPI forecast.”

The euro attempted to break parity elsewhere after a sharp drop of more than 1 percent overnight. This was after the European Central Bank raised rates 75 basis points as expected, but took an even more dovish tone about its rate outlook.

The euro rose to $0.9998, and was at its highest point at $0.99835.

The September statement by the ECB had mentioned that rates would rise “over the next several meeting”. This was taken by traders to signify that a series large rate hikes were nearing an end.

“The ECB’s policy decision were less hawkish then most expected. The main surprise was actually Christine Lagarde’s remarks that the ECB has made significant progress in withdrawing policy stimuli,” Carol Kong, a currency strategist with Commonwealth Bank of Australia (OTC).

Other major currencies were also higher due to a softer dollar that fell this week in anticipation of a Fed pivot.

The, which measures greenback against a basket currencies and with the euro being the most heavily weighted, fell by 0.17% to 110.35.

After the euro’s fall, it was unable to sustain its 0.8% overnight gain.

Sterling was up 0.6% at $1.1571, with a weekly gain of more than 2%. This was due to optimism that Rishi, the new British Prime minister, would provide an antidote in the mess left by Liz Truss.

The gain was 0.2% to $0.6468 and the advance was 0.62% at $0.58655, suggesting that both were on track to record a second consecutive week of gains.

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