The dollar was lower against the yen in Asian trade Tuesday, with comments by a Japanese government minister about the Bank of Japan’s 2% inflation target reducing hopes for extra monetary easing steps by the central bank.
Economy minister Akira Amari said Tuesday that the central bank was not constrained by a loose schedule of about two years for achieving its inflation goal, pointing to falling energy prices as a factor that would likely delay efforts to reach its target.
“It would be fine to give the BOJ more room for its main time frame of about two years,” said Amari, adding that “neither the government nor the BOJ have clearly made a rigid commitment to a deadline.”
The remarks pulled down the dollar USDJPY, -0.23% to as low as ¥118.12 in the early afternoon session before stabilizing at ¥118.34. That compares with ¥118.48 late Monday in New York.
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The comments suggest “the government is slightly loosening its interpretation” about the inflation target, thus “receding expectations for early monetary easing by the BOJ and inviting yen buying,” said Yuji Saito, executive director of foreign exchange department at Credit Agricole in Tokyo.
Market participants say the greenback has already been facing a slew of selling orders above ¥118.50, making it top heavy and prompting investors, including Japanese corporate and short-term speculative players, to lock in profits once the dollar gains momentum.
With the dollar moving in a tight ¥116-¥119 range in recent sessions, “it appears profit taking was kicking in after gains yesterday,” said Marito Ueda, director at FXPrime byGMO.
After seeing the dollar’s dips to ¥116 and ¥117 in recent sessions, there are few investors who want to actively buy at current levels. “They aren’t showing interest as long as the pair stays between the ¥118 level and the upper half of ¥117,” said Ueda.
Among other currency pairs, the euro EURUSD, +0.77% was at $1.1245 from $1.1262 and was at ¥133.06 from ¥133.41.
The WSJ Dollar Index BUXX, -0.35% , a measure of the dollar against a basket of major currencies, was down 0.08% at 85.59.