Yen hits two-week low after pro-stimulus board appointments
FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo
NEW YORK, Feb 25 : The Japanese yen reached a two-week low against the U.S. dollar on Wednesday after the Japanese government appointed two academics who are viewed as strong advocates of economic stimulus to the central bank’s board, adding to concerns about the pace of further rate hikes.
The nominations follow similar postings by Prime Minister Sanae Takaichi to several roles of people seen as economic "reflationists" who advocate loose monetary and fiscal policies to prop up growth, even if it means increasing inflation and debt.
They come after a report on Tuesday claimed Takaichi expressed reservations about additional interest rate hikes during her meeting with Bank of Japan Governor Kazuo Ueda last week, which also weakened the Japanese currency.
The Japanese yen was last down 0.35 per cent against the greenback at 156.42 per dollar.
The yen has strengthened from an 18-month low of 159.45 reached on January 14 on expectations the Bank of Japan will hike rates as it battles rising inflation in the country.
“If we zoom out, there is a secular escape from deflation happening in Japan and that should keep the 10-year JGB yields and the yen under some upward pressure. So we do think that there is scope for appreciation,” said Angelo Kourkafas, senior global strategist, investment strategy at Edward Jones.
The euro held in a tight range against the dollar as traders looked for a fresh catalyst to drive direction.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.13 per cent to 97.76, with the euro up 0.24 per cent at $1.18.
Traders are evaluating the impact of new tariffs after the U.S. Supreme Court struck down President Donald Trump’s emergency tariffs on Friday.
Trump responded by implementing new levies under an untested law, known as Section 122, that allows tariffs up to 15 per cent but requires congressional approval to extend them after 150 days. Trump said he would use the 150-day period to work on issuing other "legally permissible" 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.
“We've seen some policy volatility, especially on Friday after the court decision, that's injecting a fresh dose of uncertainty around trade and how the administration is going to respond,” Kourkafas said.
“At the same time, we continue to see the U.S. economy not only being resilient, but we're still talking about the potential for above-trend growth, productivity gains and earnings growth that is outpacing other areas,” Kourkafas added, saying that “the dollar can be mostly range bound this year.”
The Federal Reserve is expected to keep rates on hold until at least June as policymakers express concerns over still elevated U.S. inflation. The European Central Bank, meanwhile, is expected to be on hold for the entirety of 2026.
Traders are waiting on earnings from AI chipmaker Nvidia Corp, which will report after the bell on Wednesday, for a further gauge of risk sentiment.
Nuclear talks between the United States and Iran also remain in focus. Trump briefly laid out his case for a possible attack on Iran in his State of the Union speech to Congress on Tuesday, saying he would not allow the world's biggest sponsor of terrorism to have a nuclear weapon.
In cryptocurrencies, bitcoin gained 4.54 per cent to $66,967.
(Additional reporting by Stefano Rebaudo and Tom Westbrook)
