ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

image_pdfimage_print

The dollar was slightly lower against the yen in Asia trading Wednesday, as investors await comments from the Bank of Japan’s governor following a two-day monetary policy meeting that ended earlier in the day. ¬†As of 0450 GMT, the U.S. currency was at Y101.19, compared with Y101.32 late Tuesday in New York.

Earlier in the session, the dollar recouped some of its losses, briefly going as high as Y101.41, as the BOJ’s policy decision gave a temporary lift to Nikkei futures and invited short covering of the greenback. But then the dollar weakened amid subdued sentiment ahead of BOJ Gov. Haruhiko Kuroda’s news conference 0630 GMT.

As widely expected, the central bank raised its assessment of capital expenditures and left policy unchanged, another sign the central bank is feeling little pressure to ramp up monetary stimulus following a sales tax increase.

“This is not an incentive strong enough to allow active dollar buying and yen selling, and many are looking forward to Mr. Kuroda’s remarks,” pulling the dollar back down to its level earlier the day, said Yuzo Sakai, FX business promotion manager at Tokyo Forex & Ueda Harlow.

Volatility was low throughout the session, as seen in the dollar’s muted reaction to Japan’s trade balance for April. The trade deficit narrowed to Y808.9 billion, extending a deficit streak to 22 months. That was larger than a median forecast for a Y646 billion deficit in a poll of economists by the Nikkei and The Wall Street Journal, but much narrower than the Y1.45 trillion deficit in March.

Investors are now shifting their focus to Mr. Kuroda’s comments, especially any indications of possible future policy action, as well as on the recent falloff in U.S. Treasury yields and the currency market. They are also watching for any fresh cues from the release of U.S. Federal Open Market Committee meeting minutes later in the day.

Some expect the dollar to be more vulnerable to downside moves amid continued weakness in U.S. bond yields and recent stock market softness.

By Hiroyuki Kachi