Yen soars on BOJ tightening calls

The Japanese yen strengthened on Tuesday as investors reacted to comments from a senior politician calling for more aggressive monetary policy from the Bank of Japan (BOJ).

The dollar slightly rose while traders anticipated upcoming inflation data. The Australian and New Zealand dollars weakened following China’s unexpected interest rate cut.

The dollar was down 0.55 per cent against the Japanese yen at 156.13, hitting a five-week low of 155.375 on Thursday.

Senior ruling party official Toshimitsu Motegi added to the pressure on the BOJ, stating overnight that the central bank should clearly signal its commitment to normalising monetary policy through steady interest rate hikes.

The BOJ’s next policy meeting is scheduled for July 31.

“The yen derived support from further comments from Japanese politicians overnight,” said Lee Hardman, currency analyst at Japanese bank MUFG, who added that his comments indicated “growing unease” among politicians about BOJ policy.

The yen has also been supported by Tokyo’s recent intervention to prop up the currency and anticipation of the BOJ’s decision. However, most economists predict the central bank will maintain interest rates unchanged at the upcoming meeting.

The dollar index, which measures the greenback against a basket of six major currencies, rose slightly to 104.36. The euro declined 0.22 per cent to $1.0868, while the British pound fell 0.15 per cent to $1.2911.

Trading remained relatively quiet as investors awaited the release of US personal consumption expenditure (PCE) inflation figures for June on Friday.

The Australian dollar dropped to a three-week low of $0.6622, while the New Zealand dollar hit its weakest level since early May at $0.5962.

Attribution: Reuters