Dollar Regains Upperhand Over Yen as BoJ Remains Firm on Its Ultra-Loose Policy

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On Friday, the dollar surged against the yen, on pace for its biggest daily gain in around two weeks, as the governor of the Bank of Japan (BoJ) said that the central bank will retain its ultra-loose monetary policy despite rumors that a change is on the horizon.

BOJ Governor Haruhiko Kuroda said the central bank will maintain its present “extremely accommodative” monetary policy to attain its 2% inflation goal in a steady, sustainable way when he spoke to the World Economic Forum on Friday in the Swiss town of Davos.

Speculators predict that the BOJ, the last significant central bank to still practice loose monetary policy, will eventually adopt a stricter stance. Due to a yen rise fueled by this, the dollar/yen pair has fallen 14% over the last three months.

Dollar Rises to Multi-Week High

The dollar increased to a high of 130.60 yen before rising 1.1% to close at 129.86. The dollar was expected to increase by the largest amount since early January. The dollar gained 1.6% against the yen for the week, on pace for its highest week since early December.

Meanwhile, data released on Friday revealed that Japan’s core consumer prices increased by 4.0% from a year earlier in December, exceeding the BOJ’s objective.

As a deluge of data on everything from consumer spending to corporate activity and inflation across major economies underscored an increasingly shaky future for US growth, the dollar has spent the majority of the week on the back foot against a basket of currencies.

The value of the US dollar has decreased by roughly 1.3% so far in January after dropping by almost 8% in the last quarter of 2022 as a result of investors beginning to expect the Federal Reserve to halt the spate of interest rate increases.

Investors are anticipating the first Fed meeting of the year in early February now that a significant amount of top-tier data has been released.

After four straight increases of 75 basis points, the central bank increased interest rates by 50 bps in December, and the market is eagerly awaiting another decrease.