Yen slides, US dollar gains as BOJ seen maintaining loose policy

THE yen dropped against the US dollar on Friday (Jul 21) after Reuters reported that the Bank of Japan (BOJ) is leaning towards keeping its key yield control policy unchanged the following week, ahead of a busy week of central bank meetings that includes the United States and Europe.

BOJ policymakers prefer to scrutinise more data to ensure that wages and inflation keep rising before changing the policy, five sources familiar with the matter said.

The report added that there was no consensus within the central bank and the decision could still be a close call.

With inflation having exceeded the BOJ’s target for more than a year, markets have been simmering with speculation the central bank could tweak yield curve control as early as the Jul 27-28 meeting.

Data earlier on Friday showed that Japan’s core inflation rose to 3.3 per cent, matching a median market forecast but remaining ahead of the BOJ’s 2 per cent target.

The dollar gained 1.24 per cent to 141.81 yen, after earlier reaching 141.95, the highest since Jul 10.

It was trading just below the 145.07 level reached on Jun 30, which was the highest since Nov 10.

Fed funds futures traders are pricing in 33 basis points of additional tightening this year with rates expected to peak at 5.41 per cent in November.

The dollar index – which tracks the greenback against six major peers – rose 0.3 per cent to 101.06.

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Yen slides after sources say BOJ leaning to holding key policy

The euro fell 0.05 per cent against the dollar to US$1.1123.

The pound fell for a sixth day versus the dollar – its longest stretch of daily losses since last September – and was last down 0.07 per cent at US$1.2859.

It briefly bounced earlier on Friday after data showed that UK consumer spending was stronger than expected in June.

The pound is on track for a 1.75 per cent weekly fall, its largest since early February. REUTERS