Yen recovers against dollar with BOJ policy in view
U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration
TAIPEI, Feb 26 : The yen clawed back strength against the U.S. dollar during the Asian trading session on Thursday, while better-than-expected earnings from Nvidia boosted investor confidence and markets awaited details of the latest U.S. tariffs on imports of foreign goods.
The yen was last 0.3 per cent stronger against the dollar at 155.87 yen, regaining some lost ground after hitting its weakest levels in two weeks, as comments from Bank of Japan officials steadied the Japanese currency.
The yen is recovering from weakness earlier in the week after the Japanese government on Wednesday appointed two academics who are viewed as strong advocates of economic stimulus to the central bank’s board. The Mainichi newspaper also reported on Tuesday, citing unnamed sources, that Japanese Prime Minister Sanae Takaichi expressed reservations about additional interest rate hikes during her meeting with Bank of Japan Governor Kazuo Ueda last week.
Recent newsflow has "reinforced the perception that the Takaichi administration favors a dovish stance on monetary policy", Bank of America said in a note. "However, leaving yen depreciation unchecked carries political risks, and FX intervention alone would be insufficient. Policy inaction remains unlikely."
BOJ Governor Ueda said the central bank would scrutinise data at its March and April meetings in deciding whether to raise interest rates, the Yomiuri newspaper reported on Thursday, leaving open the chance of a near-term rate hike.
Meanwhile, hawkish board member Hajime Takata said in a speech that the central bank must focus on the risk of an inflation overshoot in guiding monetary policy and called for a gradual rise in interest rates.
"Further efforts from the Takaichi government to influence the BOJ threaten another round of turmoil in Japan’s bond and currency markets," analysts from Capital Economics wrote. "But we think the underlying fundamentals point towards continued stabilisation in the JGB market and a rebound in the yen."
The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was steady at 97.585 as uncertainty persisted over how U.S. President Donald Trump would respond to the Supreme Court's ruling on February 20 that struck down his emergency tariffs.
The U.S. tariff rate for some countries will rise to 15 per cent or higher from the newly imposed 10 per cent, U.S. Trade Representative Jamieson Greer said on Wednesday, without naming any specific trading partners or giving further details.
"President Trump’s 2026 State of the Union address focused on the economy but provided little-to-no information on new policy initiatives," wrote analysts from Westpac. The U.S. Trade Representative "offered no details regarding how the higher tariff will be applied in situations where it breaches U.S. trade deals."
Investor confidence got a boost after AI industry bellwether Nvidia forecast first-quarter revenue above market estimates on Wednesday, providing fresh fuel for stocks on Wall Street, which extended their tech-led rally to touch two-week highs. However, the stock eased off gains in after-hours trading, with U.S. equity futures edging lower.
The yield on the U.S. 10-year Treasury bond was last up 0.2 basis points at 4.0442 per cent.
Financial markets continue to believe almost unanimously U.S. interest rates are going nowhere at the Federal Reserve's next meeting. Fed funds futures are pricing an implied 98 per cent probability the U.S. central bank will keep rates on hold at its next two-day meeting on March 18, little changed from a day earlier, according to the CME Group's FedWatch tool.
Against the Chinese yuan in offshore trade the U.S. dollar slipped 0.3 per cent to 6.8324 yuan, the strongest level for the Chinese currency in almost three years despite the central bank signalling it wanted to curb the currency's rapid gains, underpinned by seasonal settlement demand.
The euro was last up 0.1 per cent at $1.1817, while the British pound was also little changed at $1.3555.
The Australian dollar was steady at $0.7126, while the New Zealand dollar briefly slipped below the $0.60 mark against its U.S. counterpart before recovering, last trading flat at $0.6003.
Bitcoin was last down 0.7 per cent at $68,478.38, while ether tumbled 2.0 per cent to $2,059.01.
