Yen falls to 7-month low as traders shift focus from Fed to BOJ

BLOOMBERG

The yen weakened to its lowest since November against the dollar as traders shifted their focus from a hawkish Federal Reserve to Friday’s Bank of Japan (BOJ) policy decision.
The relatively hardline stance from Fed officials stands in sharp contrast to BOJ policymakers who have stuck with monetary easing even as most global peers tighten, a disparity that favors the US currency. The Fed projected borrowing costs will go higher than previously seen, while almost all of the economists surveyed by Bloomberg see the BOJ leaving its ultra loose policy unchanged on Friday.
The Japanese currency fell 1% to around 141.50 per dollar, even after Chief Cabinet Secretary Hirokazu Matsuno said that excessive movements weren’t desirable. Last month when the yen weakened to similar levels, top currency official Masato Kanda said that the government would take action if needed, after an unscheduled meeting between the BOJ, Ministry of Finance and Financial Services Agency.
“The trend for the yen to weaken amid no policy change by the BOJ, in combination with a more hawkish Fed, is likely to continue for a while,” said Tsutomu Soma, a bond and currency trader at Monex Inc. “The authorities may verbally intervene as the yen continues to weaken but actual intervention is unlikely as there’s some benefit from it for the nation, such as higher stock prices.”
The benchmark US Treasury yield climbed 4 basis points to 3.83% in Asia trading, with its Japanese counterpart little changed at 0.42%. The widening gap between the two played a huge part in pushing the yen to a three-decade low last year.
Demand for the dollar was also likely influenced by Japanese importers, who typically buy the greenback on trading days that are a multiple of five such as the 10th, 15th and 20th of any month.