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US dollar, Japanese yen settle after bumpy week

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The Japanese yen and US dollar settled on Friday after a bumpy week driven by sharper monetary policy signals from the Bank of Japan and Federal Reserve.

[WASHINGTON] The Japanese yen and US dollar settled on Friday after a bumpy week driven by sharper monetary policy signals from the Bank of Japan and Federal Reserve.

But neither currency had moved outside of its recent trading band as markets remained unconvinced that the long-term picture for inflation and interest rates had changed much.

The dollar was slightly lower from Thursday at US$1.1228 per euro.

The yen slipped to 101.02 per dollar, still stronger than where it stood ahead of the BoJ policy move.

Markets took to heart the Fed's pointed signal that it could increase its benchmark rate in December. But an anticipated dollar strengthening never happened, as the Fed also gave a much more dovish outlook for rates over the next two years.

Meanwhile the BoJ's effort to demonstrate they were serious about stimulating inflation while holding 10-year bond yields from going negative kept the yen steady.

James Stanley of DailyFx pointed out what the markets really saw in their policy statements that caused the divergent moves.

"The Federal Reserve is expecting yield curve flattening on the back of their monetary stance while the Bank of Japan is now actively engaging in yield curve steepening."

Meanwhile, the pound sank below the US$1.30 level again after British Foreign Minister Boris Johnson said London could officially trigger the country's exit from the European Union early next year.

"Any talk of Brexit continues to roil the currency markets," said Boris Schlossberg of BK Asset Management.

AFP