Askume London/Sydney, Sep 20 – The Bank of Japan said it wouldThe yen weakened on Friday as it was widely expected that there would be no rush to raise interest rates again after keeping rates steady at 0.25% .
The dollar rose 1.2% against the yen to 144.32 yen, hitting its highest level in more than two weeks, as Governor Kazuo Ueda said the Bank of Japan has the ability to take its time to focus on the impact of global economic uncertainty.
“Our monetary policy decisions will depend on prevailing economic, price and financial developments. Real interest rates in Japan are extremely low. If our economic and price forecasts come true, we will raise interest rates and adjust the degree of monetary support accordingly,” Ueda said at the meeting, later telling a news conference.
“We expected the U.S. to be ready for another rate hike,” said Nils Christensen, chief economist at Nordea.
Shoki Omori, chief Japan counter strategist at Mizuho Securities, said the dollar’s gain against the yen showed that Governor Ueda did not actually talk about interest rate policy in his speech.
“He seems to be focusing on economic data and trying to avoid responding to market comments. He is hiding his hawkish stance,” Omori said. He added that the dollar’s gains against the yen may only be temporary.
The market is also digesting Japanese consumer price data released on Friday, which showed core inflation rose to 2.8% in August, while headline inflation reached 3.0%.
It has been a tough week for the yen, with the euro rising 3.2% to 161.05 as speculators booked profits on recent long yen positions.
The euro also strengthened against the dollar at $1.1154, up 0.7% against the greenback for the week and not far from its August peak of $1.1201. A move above this level would target the July 2023 high of $1.1275.
The dollar falls
While China’s central bank ‘s much-anticipated interest rate cut is proving elusive , much of the rest of the world is heading in the other direction, Japan. China unexpectedly kept its benchmark lending rate unchanged at a monthly fixed rate on Friday.
China is hinting at additional stimulus measures, as the Federal Reserve’s aggressive easing policy has pushed the dollar to a 16-month low against the yuan.
Major state banks bought U.S. dollars in the onshore spot foreign exchange market on Friday to prevent the yuan from rising too fast, two people familiar with the matter said.
The big story this week is still the Federal Reserve’s 50 basis point rate cut on Wednesday.
The market indicates that the probability that the Federal Reserve will cut interest rates by 50 basis points in November is close to 44%, and that it will cut interest rates by 72 basis points before the end of the year. By the end of 2025, interest rates are expected to be 2.85%, which is currently considered the Fed’s neutral forecast.
The softer outlook boosted expectations of continued US economic growth and triggered a sharp rally in risk assets. Currencies and commodity prices influenced by global economic growth also benefited, with the Australian dollar breaking above $0.6800 against the US dollar.
The US dollar index rose to 100.84, just above a one-year low.
Sterling regained gains on Thursday as the Bank of England kept interest rates unchanged, while its governor said it must be “careful not to cut rates too quickly or too much”.
Sterling is up 1.25% so far this week at $1.32885,It has risen to its highest level since March 2022 , supported by strong retail sales data on Friday.
It hit its highest level in more than two years against the euro, which fell to 83.81 pence.
