Currency Markets: Japanese Yen Rises Off Five-Month Low Against Dollar
Bank of Japan’s Policy Meeting Summary
The Japanese yen rose off a five-month low against the dollar on Friday (Dec 27) after a summary of opinions from the Bank of Japan’s (BOJ) December policy meeting showed some policymakers gaining confidence in an imminent rate increase. The Japanese central bank also cut its monthly bond purchases.
BOJ’s Rate Hike Expectations
Some BOJ policymakers saw conditions falling into place for an imminent rate hike, with one predicting a move in the near future, keeping alive the chance of a January hike. The central bank held interest rates steady at 0.25 per cent at this month’s meeting, a move governor Kazuo Ueda explained as aimed at scrutinizing more data on next year’s wage momentum and clarity on the incoming US administration’s economic policies.
BOJ’s Bond Purchases Cut
The BOJ will cut monthly Japanese government bond purchases by another 410 billion yen per month (S$3.5 billion), lowering the total to about 4.5 trillion yen per month from January.
Currency Market Analysis
The Japanese currency has weakened in recent weeks as US Treasury yields rise despite the Federal Reserve cutting rates by 100 basis points since September. Traders are pricing in the likelihood that the US central bank will make fewer cuts next year as inflation remains elevated. Analysts say the policies of the new Trump administration next year are also expected to boost growth and inflation, making traders wary of betting against the greenback.
Currency Outlook
But some see the Japanese currency staging a comeback against the dollar eventually, with Treasury yields likely to decline. "The prospect of a BOJ rate hike in the first quarter of next year … and a drift lower in Treasury yields in H2 2025, suggest the USD/JPY fair value is peaking around now and will be in the mid-130s by the end of next year," Societe Generale analyst Kit Juckes said in a recent report.
BOJ Intervention
Traders are also on watch for any potential intervention by Tokyo to shore up the currency if it continues to weaken, as they have done many times this year. Japan’s Finance Minister Katsunobu Kato on Friday reiterated concerns over a sliding yen, repeating his warning to take action against excessive currency moves.
Currency Market Update
The dollar was last down 0.09 per cent at 157.85 Japanese yen. It reached 158.09 on Thursday, the highest since July 17, and is on track for a 12 per cent yearly gain against the yen. The US dollar index fell 0.06 per cent to 108.02. It reached a two-year high last Friday of 108.54 and is on pace for a yearly increase of 6.6 per cent. The euro gained 0.04 per cent to US$1.0426, but is heading for a yearly decline of 5.6 per cent. Sterling rose 0.34 per cent to US$1.2568 and is on track for a yearly loss of 1.2 per cent. The Chinese yuan was near a 13-month low, trading at 7.2950 per dollar in the onshore market. The currency has suffered under the threat of additional US tariffs on Chinese goods under Trump. South Korea’s won dropped to a 16-year low of 1,486.7 per dollar after parliament impeached acting President Han Duck-soo, plunging the country deeper into political chaos. Cryptocurrency bitcoin fell 1.56 per cent to US$94,196. It has surged about 122 per cent this year.
Conclusion
The Japanese yen’s rise off a five-month low against the dollar is a positive sign for the currency, as some BOJ policymakers gain confidence in an imminent rate increase. The currency’s performance is closely tied to the US dollar’s movements, and a decline in Treasury yields could benefit the yen. However, the currency’s future direction remains uncertain, with potential intervention by Tokyo and the impact of the new Trump administration’s economic policies to come.
FAQs
Q: What is the current value of the Japanese yen against the US dollar?
A: The dollar was last down 0.09 per cent at 157.85 Japanese yen.
Q: What is the current value of the US dollar index?
A: The US dollar index fell 0.06 per cent to 108.02.
Q: What is the current value of the euro against the US dollar?
A: The euro gained 0.04 per cent to US$1.0426.
Q: What is the current value of the Chinese yuan against the US dollar?
A: The Chinese yuan was near a 13-month low, trading at 7.2950 per dollar in the onshore market.
Q: What is the current value of the South Korean won against the US dollar?
A: South Korea’s won dropped to a 16-year low of 1,486.7 per dollar after parliament impeached acting President Han Duck-soo.
Q: What is the current value of bitcoin?
A: Cryptocurrency bitcoin fell 1.56 per cent to US$94,196.
