On rumours of a BOJ policy change, the yen gains as the dollar falls

31 Oct 2023 , 09:50 AM

Due to speculation that the Bank of Japan (BOJ) may make additional adjustments to a crucial instrument for managing bond yields when it makes its monetary announcement later in the day, the yen was trading close to a two-week high on Tuesday.

After rising by almost 2.5% in September, the dollar appeared to be losing some of its momentum and was expected to close the month virtually steady versus a basket of currencies. Analysts point out that the U.S. economy is still robust and that the risks of another rate hike from the Federal Reserve are what support the value of the dollar.

The Japanese yen recently traded at 149.13 to the US dollar, having risen as high as 148.81 two weeks earlier on the back of a Nikkei report stating

After surging to a two-week high of 148.81 in the previous session on the back of a Nikkei report suggesting that the BOJ may permit the yield on 10-year Japanese government bonds to surpass 1% at a highly anticipated policy announcement later on Tuesday, the Japanese yen was last trading at 149.13 per dollar.

The yen’s value against the euro was last seen at 158.24, having climbed to a high of 157.70 per euro on Monday, more than a week ago. The last time the Australian dollar was worth 94.50 yen.

With a rise in risk appetite, the dollar slightly declined vs other currencies, and Israel’s ground offensive in Gaza appears to have been less widespread than initially thought.

With a modest 0.4% gain for October, the euro appeared poised to snap two months of losses. It was last trading flat at $1.0611.

Germany’s inflation rate decreased significantly in October, according to data released on Monday. Meanwhile, another report released the same day revealed that the continent’s largest economy contracted somewhat in the third quarter.

Preliminary statistics released on Monday also indicated that October’s 12-month inflation in Spain remained at 3.5%, the same as it did in September.

The numbers are released ahead of Tuesday’s anticipated inflation data for the euro zone.

Ahead of the Bank of England’s interest rate announcement later this week, where expectations are for the central bank to stand pat, sterling slipped 0.07% to $1.2159 and was set to give up more than 0.3% for the month. 

In other news, the Australian dollar fell 0.09% to $0.6368, putting it on track to lose more than 1% each month.

The weakening risk appetite throughout the world and the prospect of another rate hike were the main drivers of the New Zealand dollar’s 0.15% loss to $0.5835, which was on track for a 2.7% fall in October.

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