Japanese Yen Slumps On Dovish BOJ, Asia FX Hit By Fed Fears

The Japanese yen fell sharply on Friday after the Bank of Japan maintained its dovish stance. At the same time, broader Asian currencies also came under pressure from renewed fears of more interest rate hikes by the Federal Reserve.

The yen was the worst-performing Asian currency for the day, down 0.7% to a one-week low after the Bank of Japan maintained interest rates at record lows. It said it would continue with its quantitative easing and yield curve control policies.

Japanese 10-year bond yields rallied after the move and were close to testing the upper 0.5% limit, as the BOJ said it would “patiently” maintain its accommodative policies for now.

But the bank also hiked its inflation forecast for fiscal 2023, while separate data showed inflation in Tokyo grew more than expected in April, moving back towards 40-year highs. Rising inflation could pressure the BOJ into potentially tightening policy later this year, although the bank quashed such expectations by announcing a year-long monetary policy review.

Broader Asian currencies moved in a flat-to-low range on Friday but were set to end the week lower as investors positioned for a widely expected 25 basis point rate hike by the Federal Reserve next week.

The Chinese yuan rose 0.2%, recovering slightly from an over one-month low hit earlier in the week, while the South Korean won added 0.1% on data that showed industrial production fell less than expected in March.

The Australian dollar fell 0.2% as a Reuters poll showed that the Reserve Bank is widely expected to hold interest rates steady next week.

The U.S. dollar index and dollar index futures rose about 0.2% each but were headed for weekly losses following weak signals on the U.S. economy.

Data on Thursday showed that the world’s largest economy grew slower in the first quarter amid pressure from high inflation and interest rates. The dollar was essentially flat after the data.

But Treasury yields still rallied in overnight trade as other readings pointed to higher-than-expected personal consumption expenditures in the first quarter, while weekly jobless claims also unexpectedly fell.

Signs of sticky inflation and strength in the labor market give the Fed more impetus to hike interest rates. Markets are now uncertain over the path of monetary policy after May’s meeting, given that the Fed has offered no signals that it plans to taper its hawkish stance.

Leave a Reply

Important Link

Fund Your Deriv Account
Withdraw Funds to Your Local Currency
VIP Trading Signals
Learn To Trade

Contact Us

Follow Us


Forex, Crypto, Options, and Binary Options have both large potential rewards and large potential risks. Therefore, before investing or trading any of the assets, ensure you are aware of and willing to accept the accompanying risks. Do not trade money you cannot afford to lose.

All Rights Reserved. None of the content of this website can be published elsewhere by any means without the prior consent of the owner(s). Please, check our terms & conditions and privacy policy before continuing to use this website.

This website and its owner(s) are not in any way liable for any incurred loss, whether caused by the information provided on this website or otherwise. The use of this website, including the content and information provided, is the user’s sole liability.