The yen strengthened against the U.S. dollar Thursday, taking USD/JPY to a monthly low before a modest rebound as traders looked toward next week's Fed and Bank of Japan (BOJ) meetings.
Reuters said the advance put the yen on pace for its largest daily rise in about a month. The outlet linked the move to risk aversion, lower government-bond yields and traders paring bets on further U.S. rate increases. Chris Scicluna, head of economic research at Daiwa Capital Markets, told Reuters, “AI is making people nervous, as is oil … and as is France.”
FXStreet reported that USD/JPY fell through support in the mid-¥157 range during early European trading and set a monthly low. At about 4:09 a.m. ET (08:09 UTC), it had recovered a few pips to just above ¥157 but remained more than 0.6% lower on the day. Reuters separately reported a rate of ¥157.27, down 0.6% Thursday. USD/JPY shows the yen price of one dollar, so a lower rate means the dollar buys fewer yen.
The yen had traded near ¥158 ahead of the BOJ's October meeting, as EconoTimes reported earlier. On Sept. 18, the BOJ set the uncollateralized overnight call-rate guideline at roughly 1.25%. The U.S. federal funds target range is 3.75%-4.00%, or 2.5 to 2.75 percentage points above the BOJ guideline.
On Oct. 6, BOJ Gov. Kazuo Ueda said underlying inflation was approaching the bank's 2% target. He said future adjustments to monetary easing would respond to economic, price and financial conditions, with their timing and pace guided by the BOJ's outlook and risk assessment.
Minutes from the Federal Open Market Committee's (FOMC) Sept. 15-16 meeting said most participants judged another increase in the federal funds target was likely to be appropriate before year-end. The committee raised its target range to 3.75%-4.00% at that meeting. The Fed meets Oct. 27-28, followed by the BOJ on Oct. 29-30; the BOJ's October outlook statement is also scheduled for Oct. 30.
