USD/JPY Above 118 on Policy Divergence

The dollar reached a seven-year high against the yen as minutes from the Federal Reserve’s latest policy meeting show the U.S. moving toward higher interest rates while Japan pursues further economic stimulus.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, closed at a more than five-year high as Fed policy makers weighed a commitment to holding rates at virtually zero for a “considerable time.” The yen slid versus most of its 31 major peers as the Bank of Japan maintained record stimulus after Prime Minister Shinzo Abe called an early election. New Zealand’s dollar ended a six-day advance as the price of milk powder fell.

“I don’t think the Fed minutes change much for the market,” said Daniel Katzive, head of foreign-exchange strategy, North America, at BNP Paribas SA in New York. “The data has been strong enough to suggest Fed hikes are possible in the first half of the year.”


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