By Gertrude Chavez-Dreyfuss and Amanda Cooper
NEW YORK/LONDON (Reuters) – The dollar soared against the yen on Friday, on track for its largest daily gain in roughly two weeks, after the Bank of Japan governor repeated that the central bank will maintain its ultra-loose monetary policy amid speculation an imminent shift is coming.
BOJ Governor Haruhiko Kuroda, who addressed the World Economic Forum in the Swiss town of Davos on Friday, said the central bank will continue its current “extremely accommodative” monetary policy to achieve its 2% inflation target in a stable, sustainable manner.
Speculators are betting that the BOJ, the last major central bank to still employ loose monetary policy, is edging towards a shift to a tighter stance. That has driven a rally in the yen that has pushed the dollar/yen pair down by 14% in the past three months.
“There are some doubts within the BOJ whether the boost in inflation in Japan is going to deliver them all the way back to 2%,” said Thierry Wizman, global FX and rates strategist at Macquarie in New York.
“Given that there is disinflation now suddenly around the world including the U.S., I can see where that is a valid concern. So between now and the next meeting, there is no policy shift and that is indicated by Kuroda,” he added.
The dollar rose as high as 130.60 yen and was last up 1.1% at 129.86. The greenback was on track for its biggest percentage gain since early January.
On the week, the dollar rose 1.6% versus the Japanese currency, on pace for its best week since early December.
Data on Friday showed Japan’s core consumer prices in December rose 4.0% from a year earlier, double the BOJ’s target.
“Japan now has an inflation problem that it hasn’t had in nearly 40 years,” CMC Markets chief strategist Michael Hewson said.
“For me, the die is cast – dollar/yen will go lower and it’s a question of how quickly,” he said.
Against a basket of currencies, the dollar rose 0.2% to 102.20.
The greenback has been mostly on the defensive all week against a basket of currencies, as a slew of data from consumer spending to business activity and inflation across major economies highlighted an increasingly fragile outlook for U.S. growth..
“Everything is poised to take us to year-over-year inflation that’s well inside the 3% level. Against that backdrop, China is going to do better…and certainly Europe is going to do better as well when this winter emergency is over,” Macquarie’s Wizman.
“The first half of the year will be a period when the rest of the world is going to do much better than the U.S. That’s the basis for why the dollar can continue to come down from here.”
The U.S. currency has lost about 1.3% so far in January, having fallen nearly 8% in the final three months of 2022, when investors began factoring in a higher chance of the Federal Reserve slowing down the pace of interest-rate rises.
With much top-tier data out of the way now, investors are waiting for the first Fed meeting of the year in early February.
The central bank raised interest rates by 50 basis points (bps) in December after four straight 75 bps increases, and the market is eagerly anticipating another stepdown.
ING economists said the intense scrutiny of U.S. growth means that the dollar remains vulnerable to data releases as markets keep scaling back Fed rate expectations.
Meanwhile, the euro was up 0.1% at $1.0843, while sterling was flat at $1.2392, after UK data showed a surprise drop in retail sales in December, as British shoppers bought less, but spent more.
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Currency bid prices at 10:43AM (1543 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 102.2100 102.0400 +0.18% -1.237% +102.5500 +101.9300
Euro/Dollar $1.0831 $1.0829 +0.02% +1.09% +$1.0859 +$1.0803
Dollar/Yen 129.8750 128.4150 +1.13% -0.95% +130.6000 +128.3500
Euro/Yen 140.66 139.10 +1.12% +0.26% +141.1900 +139.0600
Dollar/Swiss 0.9216 0.9162 +0.55% -0.37% +0.9234 +0.9143
Sterling/Dollar $1.2378 $1.2393 -0.11% +2.36% +$1.2397 +$1.2336
Dollar/Canadian 1.3420 1.3470 -0.38% -0.96% +1.3497 +1.3411
Aussie/Dollar $0.6950 $0.6910 +0.60% +1.97% +$0.6966 +$0.6908
Euro/Swiss 0.9980 0.9921 +0.59% +0.86% +0.9987 +0.9920
Euro/Sterling 0.8748 0.8741 +0.08% -1.09% +0.8786 +0.8740
NZ $0.6448 $0.6397 +0.87% +1.61% +$0.6468 +$0.6392
Dollar/Dollar
Dollar/Norway 9.8895 9.8980 -0.06% +0.80% +9.9355 +9.8750
Euro/Norway 10.7104 10.7147 -0.04% +2.11% +10.7504 +10.6944
Dollar/Sweden 10.3079 10.3085 -0.09% -0.96% +10.3574 +10.2804
Euro/Sweden 11.1605 11.1708 -0.09% +0.10% +11.1980 +11.1470
(Reporting by Gertrude Chavez-Dreyfuss in New York and Amanda Cooper in London; Additional reporting by Ankur Banerjee in Singapore; Editing by Hugh Lawson, Kirsten Donovan)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.