Japanese yen surges on BOJ pivot talk; Dollar steadies as rate cheer cools
Investing.com-- The Japanese yen rose to a one-month high on Thursday amid growing conviction that the Bank of Japan was close to raising interest rates, while the dollar curbed recent losses as Federal Reserve officials presented mixed cues on interest rates.
Broader Asian currencies were muted, trimming most of their initial gains as investors remained uncertain over the timing and scale of the Fed’s potential rate cuts.
The Japanese yen was the best performer in Asian trade, firming 0.6% to a one-month high of 148.52 against the dollar.
The yen was boosted by a slew of factors presenting a less dovish outlook for the BOJ. Data showed average cash earnings grew more than expected in January, while a major Japanese union also won big pay hikes for some of its members- pointing to higher overall wages in the coming months.
Additionally, BOJ board member Junko Nakagawa said that the Japanese economy was making steady progress towards the central bank’s 2% inflation target- a scenario that is expected to elicit a rate hike from the BOJ.
Wage growth and inflation are the two biggest considerations for the BOJ in raising interest rates. Strong signals on both fronts saw markets now pricing in the possibility that the BOJ will begin hiking rates by as soon as its March meeting — a scenario that bodes well for the yen.
The dollar index and dollar index futures fell 0.1% each in Asian trade, but traded marginally above a one-month low hit in overnight trade. Pressure on the dollar also came chiefly from a stronger yen.
The greenback had tumbled in overnight trade after Fed Chair Jerome Powell said the bank will cut interest rates in 2024.
But Powell offered few cues on the timing and scale of the Fed’s planned cuts, and
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