The yen outperformed most of its Group of 10 peers on Monday, rallying against the dollar in a jittery session ahead of key central bank events later in the week.
The Japanese currency rose as much as 1.7% against the U.S. dollar to 145.19 before paring the gain to about 0.8% in New York trading. The rally came amid broad dollar weakness, with investors on edge ahead of Bank of Japan Governor Kazuo Ueda’s address to parliament on Friday and Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole later in the day.
The market is on tenterhooks for clues from Ueda on the BOJ’s rate hike path, as Deputy Governor Shinichi Uchida took a more dovish stance following market turmoil after the July 31 policy meeting. Domestic politics have also fueled uncertainty after Prime Minister Fumio Kishida said he would not seek re-election as chairman of the ruling Liberal Democratic Party in September.
“There appear to be investors who have not stopped betting on BOJ interest rate hikes,” said Hideki Shibata, a rates and currency strategist at Tokai Tokyo Intelligence Laboratory Co. “Investors may be trying to buy yen against the dollar ahead of the U.S. and Japanese central bank chiefs’ speeches.”
The Bloomberg Dollar Spot Index fell 0.4% to its lowest level since late March, weighed down by a stronger yen. The Australian and New Zealand dollars also gained ground against the greenback.
According to Skylar Montgomery Koning, currency strategist at Barclays Capital, the slow pace of normalization by the Bank of Japan “is not significantly reducing the interest rate differential or increasing the attractiveness of the yen.” This is also making the yen dependent on expectations about U.S. rates, she said.
“Powell will likely lean toward a September rate cut at Jackson Hole, but there is no need for the Fed to give up the option of another labor market report before the September meeting,” he said. “A too dovish stance has already been priced in, so the risk is that the market will be disappointed.”
With the help of Daisuke Sakai, Anya Andrianova and Cristin Flanagan.
This article was generated from an automated news agency feed without any modifications to the text.
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