(Bloomberg) — The yen outperformed among Group-of-10 currencies on Monday, rallying more than 1% against the dollar in jittery trading ahead of key central bank events later in the week.
Japan’s currency climbed as much as 1.7% versus the greenback to 145.19, before trimming the advance to about 1.1% as of 5:17 p.m. in Tokyo. The rally came amid broad weakness in the dollar, with investors on edge before Bank of Japan Governor Kazuo Ueda appears in parliament on Friday, and Federal Reserve Chair Jerome Powell speaks at Jackson Hole later the same day.
The market is on tenterhooks for hints from Ueda on the BOJ’s rate-hike path, given that his Deputy Governor Shinichi Uchida took a more dovish line in the wake of market turmoil following the July 31 policy meeting. Domestic politics has also fueled uncertainty after Prime Minister Fumio Kishida said he wouldn’t run for re-election as president of the ruling Liberal Democratic Party in September.
“There appear to be investors who haven’t given up betting on BOJ interest-rate hikes,” said Hideki Shibata, a senior rates and foreign-exchange strategist at Tokai Tokyo Intelligence Laboratory Co. “Investors may be trying to buy the yen against the dollar before the heads of the US and Japanese central banks speak.”
Asian currencies as a whole were strengthening Monday as domestic sentiment improves in the US and traders bet on a rate cut by the Fed next month. The Bloomberg Dollar Spot Index slipped 0.3% while the Bloomberg Asia Dollar Index gained 0.6%.
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“The dollar continues to weaken, as fears of a slowdown in the US economy have eased, but there are still doubts that the indicators are not as strong as they could be,” said Go Ohara, director of the FX trading department at MUFG Bank Ltd. “There is a risk of further decline of dollar-yen through overseas hours.”
–With assistance from Daisuke Sakai.
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