USD/JPY Break 107 After Kuroda and Abe Meeting

The U.S. dollar briefly rose above 107 yen for the first time since September 2008 in Tokyo on Thursday, amid expectation the monetary policy directions of the Bank of Japan and U.S. Federal Reserve are set to diverge further.

At 5 p.m., the dollar fetched 106.86-87 yen compared with 106.82-92 yen in New York and 106.63-64 yen in Tokyo at 5 p.m. Wednesday. It moved between 106.64 yen and a nearly six-year high of 107.04 yen during the day, changing hands most frequently at 106.77 yen.

The euro was quoted at $1.2935-2936 and 138.23-27 yen against $1.2913-2923 and 137.99-138.09 yen in New York and $1.2931-2932 and 137.89-93 yen in Tokyo late Wednesday afternoon.

The dollar, already supported by speculation of a hawkish Fed gearing up to raise U.S. interest rates, climbed above 107 yen mid-afternoon after Bank of Japan Governor Haruhiko Kuroda told reporters that the central bank will not hesitate to further ease policy if a 2 percent inflation goal starts looking difficult to achieve.

Kuroda had just met with Prime Minister Shinzo Abe amid signs of a slowdown in consumption after a 3-percentage-point consumption tax increase in April. Japan’s government is aiming at the 2 percent target as it considers whether to implement a further consumption tax hike as planned.

Further easing by the BOJ while the Fed undertakes its widely expected tightening of policy in line with U.S. economic recovery would widen the Japan-U.S. interest rate gap, making the dollar more attractive against the yen than at present.

Upbeat U.S. data and recent statements from Fed policymakers have convinced many market players a rate hike is forthcoming, said Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza