Japanese yen slides after BOJ keeps dovish course; Asia FX muted
Investing.com-- The Japanese yen fell sharply on Tuesday after the Bank of Japan maintained its ultra-dovish stance and offered no cues on a planned pivot, while broader Asian currencies were muted as a post-Federal Reserve rally cooled.
Resilience in the dollar also weighed on regional units, as some Fed officials downplayed enthusiasm that interest rate cuts by the central bank were imminent.
The yen was the worst performer in Asia for the day, down 0.6% after the BOJ held interest rates at negative levels and offered no cues on when it planned to begin tightening policy.
Still, the central bank warned that Japanese inflation was likely to remain sticky in the coming months- a trend that could see the bank come under increased pressure to tighten policy.
While Governor Kazuo Ueda had offered some signals on potential policy tightening in 2024, he reiterated the need for ultra-loose policy in the near-term, citing increased economic risks to Japan. The BOJ echoed this stance on Tuesday.
Still, the yen remained close to recent five-month highs against the dollar, having recovered sharply following dovish signals from the Fed last week.
Most Asian currencies, while softening slightly on Tuesday, were also sitting on strong gains against the dollar over the past week, after the Fed said it was done raising interest rates and will consider rate cuts in the coming year.
The Australian dollar rose 0.2%, remaining close to five-month highs. The minutes of the Reserve Bank’s December meeting showed that while the bank had considered hiking rates, it kept them on hold in anticipation of more economic cues.
The Chinese yuan fell 0.1% before a People’s Bank of China decision on loan prime rates later this week. The central
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