TOKYO, Jan 24 — The yen rose today as Japanese bond yields climbed sharply on hopes that ultra-loose monetary policy will soon end, while the dollar fell as the euro and pound advanced.
The dollar was last down 0.66 per cent against the yen at 147.39. The yen tracked Japanese government bond yields, which leapt to six-week highs after Bank of Japan chief Kazuo Ueda said yesterday that the prospects of achieving the central bank’s inflation target were gradually increasing.
Strong Japanese export data today added to the positive mood around the yen, as did a dip in US bond yields as investors tried to gauge the likely path of Federal Reserve interest rates.
“Ueda’s comments have given the market a little more confidence that April is definitely a live date for a potential exit from the current policy,” said Ray Attrill, head of FX research at National Australia Bank.
The euro was last up 0.4 per cent at US$1.0896 (RM5.16) after falling 0.27 per cent yesterday.
It rose slightly after purchasing managers’ index surveys showed that the euro zone economy’s downturn eased somewhat in January although it remained sluggish. The euro slipped to its lowest against the pound since early September at 85.4 pence.
The dollar index was down 0.42 per cent at 103.08, reversing the previous two days’ 0.26 per cent increase.
It touched its highest since December 13 at 103.82 yesterday and is up just under 2 per cent this year as stronger-than-expected data and push-back from central bankers has caused the market to rein in its expectations for rapid rate cuts this year.
Investors’ focus was on the European Central Bank’s latest interest rate decision tomorrow, where President Christine Lagarde could give hints about when euro zone interest rates might start falling, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“The dollar index currently is literally almost unchanged since last Wednesday,” he added. “In many ways it’s following US rates (bond yields) which have also been chopping around... FX and rates markets are waiting for the next catalyst.”
Sterling was last 0.55 per cent higher at US$1.2755. It received a boost from survey data which showed that British services firms saw another pick-up in growth in January.
China’s central bank said today it will cut the amount of cash banks must hold as reserves by 50 basis points from February 5, in an attempt to boost lending and the economy.
The onshore yuan strengthened after the announcement, touching an almost two-week high of 7.1601 to the dollar.
Tan said the yuan could also be receiving a boost from a report that China is mulling a large stimulus package to boost its financial markets, which would likely involve offshore funds selling dollars in favour of yuan.
The US rate futures market yesterday priced in a roughly 52 per cent chance of a March rate cut, up from late on Monday, but down from as much 80 per cent about two weeks ago, according to LSEG’s rate probability app. — Reuters