The Japanese yen fell in Asian trade on Thursday away from five-month highs against the dollar on profit-taking, as the odds of Japanese interest rate hike in March declined following cautious remarks by BOJ officials.
The yen is also pressured by higher US 10-year treasury yields ahead of important US labor data this week, which could provide fresh pricing for the odds of a Fed rate cut in the next quarter.
The Price
The USD/JPY pair rose 0.3% today to 149.33, with a session-low at 148.72.
The yen rose 0.6% against the dollar on Wednesday, approaching a five-month high at 148.09.
Cautious Remarks
Bank of Japan Governor Kazuo Ueda said on Wednesday that monetary policy divergence with other countries could increase instability especially at the forex market. He cautioned that mounting geopolitical tensions between countries could lead to a sudden change in capital inflows across borders.
BOJ Deputy Governor Shinichi Uchida said that the BOJ monetary policy doesn’t aim at manipulating the forex market or reducing the yen’s value, and he added that the BOJ will take US tariffs into account when reviewing economic outlook.
Uchida said there are no plans for a rate hike at each monetary policy meeting, and no preconceived view on the pace of future rate hikes, as such moves will depend on the economy and inflation.
Japanese Rates
Following the remarks, the odds of a Bank of Japan interest rate hike in March fell from 85% to 65%.
US Yields
US 10-year treasury yields rose 1.1% on Thursday on track for the third profit in a row, hitting a week high at 4.326%, in turn boosting the dollar.
It comes as investors assess the impact of US tariffs on Canada, Mexico, and China in regards to inflation in the US.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at just 5%.
