Tokyo: The Japanese yen hovered near a five-month low against the U.S. dollar on Friday, reflecting the contrast between the Federal Reserve’s hawkish stance and the Bank of Japan’s cautious approach to monetary policy adjustments. As of 0030 GMT, the yen traded at 157.725 per dollar, a slight 0.1% rise from Thursday but still close to the session low of 158.09 per dollar, the weakest level since July 17.
Bank of Japan Maintains Cautious Tone
A summary of opinions from the Bank of Japan’s (BOJ) December policy meeting, released on Friday, revealed a split among officials. Some expressed confidence in a near-term rate hike, while others remained wary due to uncertainties surrounding wage trends and global economic conditions, particularly in the United States. BOJ Governor Kazuo Ueda reiterated that assessing the full impact of economic indicators would take “considerable time.”
Tokyo’s inflation data for December, also released Friday, supported the case for future rate hikes. However, the BOJ has maintained its steady course for now.
Federal Reserve’s Hawkish Messaging
In stark contrast, the U.S. Federal Reserve has maintained a hawkish outlook. Earlier this month, Fed Chair Jerome Powell emphasized caution regarding further rate cuts following an expected quarter-point reduction. The Fed’s stance, coupled with expectations of looser U.S. regulations and pro-growth policies under the incoming Donald Trump administration, has bolstered the dollar.
The dollar is set to close the month with a 5.4% gain against the yen and an 11.9% increase for the year.
Analysts Caution on Market Dynamics
Analysts at Mizuho Securities, Masafumi Yamamoto and Masayoshi Mihara, warned of potential corrections in the strong dollar-weak yen trend, highlighting risks of pullbacks and firmer intervention warnings from Japanese officials. On December 20, Japan’s finance minister and top foreign exchange diplomat expressed concern over “excessive” currency movements and signaled readiness for “appropriate action”.
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Global Currency and Crypto Movements
The U.S. dollar index, which tracks the greenback against a basket of six major currencies, remained steady at 108.09, up 2.2% for the month. Trading activity has been subdued due to the holiday season.
Other currencies also showed minor fluctuations. The euro held steady at $1.0421, down 1.5% in December, while the British pound was little changed at $1.25275, marking a 1.7% monthly decline.
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Bitcoin, the leading cryptocurrency, stood at $95,660, slipping 1.2% in December but boasting a 125% surge for the year. It reached a record high of $108,379.28 on December 17.
