USDJPY steady ahead of BoJ

SINGAPORE (Reuters) – The dollar held near a one-week high against the yen on Thursday, supported by a rise in U.S. bond yields, with moves limited ahead of a Bank of Japan policy decision and a news conference by the BOJ governor.

A rise beyond last week’s high of 113.75 yen would send the dollar to its highest level in more than a month.

Analysts said the dollar was supported against the yen after the U.S. 10-year Treasury yield rose to a nine-month high on Wednesday as investors worried over whether the tax cuts would lead to higher U.S. debt, increased bond issuance, and more aggressive rate hikes by the Fed.

The Republican-controlled U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.

A rise in German bond yields helped underpin the euro, which held steady at $1.1873, having risen more than 1 percent so far this week.

Market players, however, are looking to a post-meeting news conference by BOJ Governor Haruhiko Kuroda, for clues on whether the central bank is getting closer to joining the U.S. Federal Reserve and European central banks in winding back stimulus. A speech by Kuroda in November sparked such speculation when he mentioned the concept of a ‘reversal rate’ – a level at which low interest rates start to have more harmful side-effects than benefits.

If Kuroda’s comments are interpreted as sounding hawkish the dollar might come under pressure against the yen, said Stephen Innes head of trading in Asia-Pacific for Oanda in Singapore.

“If he maintains the dovish narrative, which we’re all expecting, maybe we get a little bounce higher on dollar/yen,” Innes said, adding however, that he wasn’t expecting Kuroda’s comments to trigger any aggressive moves.

Reuters

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes