Yen rises in early trade, dollar up slightly

28 Jul 2023 , 10:12 AM

On Friday, the yen gained ground as speculation increased that the Bank of Japan would change its approach to controlling the yield curve. In contrast, the dollar held onto its gains from the previous day following better-than-anticipated U.S. economic statistics.

The BOJ is anticipated to maintain its ultra-low interest rates later on Friday, but investors are watching for any potential small adjustments that could be made to prolong the life of its yield control programme.

The Nikkei newspaper reported the central bank will maintain its 0.5% cap for the 10-year government bond yield, but discuss allowing long-term interest rates to rise above that level by a certain degree.

By extending the yield range and allowing the 10-year rate to increase by up to 0.5% in December of last year, the BOJ shocked the market.

The BOJ decision brings to an end a busy week for international central banks. The Federal Reserve and the European Central Bank both raised interest rates by 25 basis points earlier this week, continuing the trend of policymakers following forecasts.

The ECB did raise the prospect of a break in September, though, as concerns about a recession grow and inflation pressures show shaky indications of easing.

The euro fell 1% on Thursday as a result of Lagarde’s remarks. In Asian time on Friday, the euro was little changed at $1.09775.

The Fed left the door open for additional rate increases on Wednesday, but Fed Chair Jerome Powell offered few signals about the September meeting.

The U.S. economy expanded more quickly than anticipated in the second quarter thanks to consumer spending being supported by a resilient employment market and corporations increasing equipment investment, according to data released tonight.

Initial claims for state unemployment benefits decreased by 7,000 to a seasonally adjusted 221,000 for the week ended July 22, the lowest level since February, according to a separate Labour Department report. Experts had predicted 235,000 claims.

The dollar surged 0.059% to 101.74 against a basket of currencies, up 0.66% overnight.

The kiwi lost 0.23% to $0.617 and the Australian dollar dropped 0.12% to $0.670.

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