Yen eyes first monthly gain since March; dollar headed for monthly loss
By Rae Wee
SINGAPORE (Reuters) — The yen edged steadily higher on Monday following a volatile session at the end of last week after the Bank of Japan (BOJ) loosened its grip on interest rates, and was on track to reverse three consecutive months of loss.
The U.S. dollar was conversely headed for a monthly loss on the prospect that the Federal Reserve's aggressive rate-hike cycle — a key driver of the dollar's strength — could have concluded with last week's 25-basis-point increase.
The yen was last roughly 0.3% higher at 140.77 per dollar, nursing some of its heavy loss from Friday after the BOJ maintained ultra-low rates, though made its bond yield curve control (YCC) policy more flexible and loosened its defence of a long-term rate cap.
That sent the yen into a tailspin as traders tried to determine the implications of the move. The dollar eventually ended the session with a 1.2% gain against the Japanese currency, though that was after it had slid 1% to a session-low of 138.05 yen.
«The BOJ threw a curve ball into the market on Friday with its cosmetic change to YCC — in essence, it was a brilliant move by the central bank, and they've managed to bridge the volatility that would come with a straight change to a -/+ 1% range in the YCC band,» said Chris Weston, head of research at Pepperstone.
«They've given themselves all the flexibility should they wish to tighten policy in the future without tidal waves in global bond markets.»
Elsewhere, the dollar edged broadly lower in early Asia trade, with the dollar index steadying at 101.62.
It was headed for a monthly decline of roughly 1.2%, extending its loss to a second month.
Data on Friday showed that the annual U.S. inflation rate rose at its slowest pace in more than
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