Singapore - The dollar approached a three-month high versus the yen on growing confidence that the Federal Reserve will raise interest rates this year while the Bank of Japan (BoJ) maintains its stimulus programme.
The BOJ will keep policy unchanged at next week’s meeting, according to economists surveyed by Bloomberg News.
In the US, gross domestic product data due on Friday and a nonfarm payrolls report next week will offer further clues on the health of the world’s-largest economy. The greenback retreated from the day’s high versus its Japanese counterpart after BOJ Governor Haruhiko Kuroda said the central bank may not need to buy ¥80trn of bonds every year to achieve its target of a 10-year yield of around zero.
The dollar rose 0.1% to ¥104.59 at 08:24 after climbing as much as 0.2%, extending a 0.7% appreciation in the previous three days. The greenback touched ¥104.87 on Tuesday, its strongest level since July 29.
“We don’t expect the BOJ to change policy next week, so it will be the dollar side that will drive dollar-yen’s moves,” said Khoon Goh, head of regional research at Australia & New Zealand Banking in Singapore.
“At this stage the 105 level is a very firm technical resistance level and will require a bout of dollar strength or a surprise easing move by the BOJ for it to break.”
The Bloomberg Dollar Spot Index, which measures the US currency’s performance against a basket of 10 major counterparts, was little changed following a 0.2% gain on Wednesday.
Treasury yields rose for a second day as futures trading indicates a 73% probability the Fed will tighten policy by year-end, up from 64% a week earlier. The Federal Open Market Committee will next meet on November 1 to November 2, a week before the US presidential election.
“It’s difficult to sell the dollar unless there is something material to deny a December rate hike,” said Kengo Suzuki, chief currency strategist at Mizuho Securities in Tokyo. “US economic fundamentals are also recovering to put a rate hike within sight to support the dollar.”
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