Fundamental Comment

Yen strengthens to five-month high despite Kuroda comments


The Japanese yen traded near the highest level in five months versus the U.S. dollar on Tuesday despite comments from Bank of Japan Governor Kuroda about the importance of the current monetary stance.

The USDJPY pair touched a new bottom at 107.63, a level not seen since September 8 last year, extending its plunge for a second straight session.

Kuroda stressed that the current monetary easing policy was still needed to hold bond yields lower amid the large purchases of government bonds and as inflation remains far from the 2 percent target.

His remarks should have pushed the yen lower, as it signals a shift away from the general trend of other major central banks that seem to be preparing for a reverse in monetary policy.

The yen was the only currency that advanced the dollar last week due to the high turbulence in the market that led to a sharp sell off in stock markets.

Japan Nikkei 225 index ended 0.65% lower at 21,244.68, as the yen’s strength weighed on exporters’ shares.

Eyes will focus on Japan’s preliminary GDP this week, which may show a slow to 0.2 percent in the fourth quarter.

Investors will put U.S. inflation data due on Wednesday under scrutiny, as it is likely to shape this year’s interest rate hikes trajectory by the Federal Reserve.

The dollar index, which tracks the green currency’s movements versus a basket of major currencies, slipped to 89.70 to resume its ease from a two-week high of 90.44 hit on Friday.

The green currency came under pressure after the announcement of President Donald Trump’s $4.4-trillion budget that would raise U.S. deficit next year by nearly double last year’s projections to $984 billion and climbing to $7.1 trillion over the next decade.

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