Forex News: Yen Recovers After BoJ Ueda Remarks

Yen Recovers After BoJ Ueda Remarks

(RTTNews) - The Japanese yen recovered from early weakness against other major currencies in the European session on Friday, after the Bank of Japan (BoJ) Governor Kazuho Ueda's news conference.

The BoJ Ueda said that despite the hike in December, conditions are still favorable and that underlying inflation is approaching 2%, indicating that the bank is still committed to raise interest rates gradually.

Ueda confirmed that the central bank's council must understand the effects of prior rate hikes before tightening monetary policy further.

Earlier, the JPY had reached new record highs above 186.80 as a result of the Bank of Japan's (BoJ) Monetary Policy announcement.

The Bank of Japan retained its key interest rate following a quarter-point hike in December and raised its economic growth outlook citing the effects of government's stimulus package.

The policy board, headed by Ueda Kazuo, voted 8-1 to maintain the uncollateralized overnight call rate at around 0.75 percent.

The rate had previously been increased by 25 basis points in December, taking it to the highest level since 1995.

The decision came after Prime Minister Sanae Takaichi set the stage for a snap election on February 8, and pre-election fiscal giveaways hit both JGBs and the yen.

At the meeting, BoJ board member Takata Hajime advocated a rate hike of 25 basis points saying that price stability target had been more or less achieved and overseas economies is on a recovery phase. The rate hike proposal was defeated by a majority vote.

European stocks traded slightly lower and were on track to snap a five-week winning streak due to geopolitical and trade tensions linked to Greenland.

In economic news, data from the Ministry of Internal Affairs and Communications showed that the consumer prices were down a seasonally adjusted 0.1 percent on month in December. That missed forecasts for a flat reading following the downwardly revised 0.3 percent increase in November.

On a yearly basis, consumer prices were up 2.1 percent versus expectations for a gain of 2.3 percent and down from 2.9 percent in the previous month.

Core CPI was up an annual 2.4 percent - in line with expectations and down from 3.0 percent a month earlier.

Data from Jibun Bank showed that the manufacturing sector in Japan expanded in January, with a manufacturing PMI score of 51.5. That's up from 50.0 in December.

The report also showed that the services PMI improved to 53.4 from 51.6 a month earlier and the composite PMI climbed to 52.8 from 51.1.

In the early European trading today, the yen rose to a 2-week high of 157.39 against the U.S. dollar and a 2-day high of 114.13 against the Canadian dollar, from an early 9-day low of 159.23 and a 1-1/2-year low of 115.43, respectively. If the yen extends its uptrend, it is likely to find resistance around 156.00 against the greenback and 113.00 against the loonie.

Against the euro, the pound and the Swiss franc, the yen advanced to 184.85, 212.55 and 199.23 from an early 35-year low of 186.87, a 17-year low of 214.85 and a record low of 201.31, respectively. The yen may test resistance near 183.00 against the euro, 210.00 against the pound and 196.00 against the franc.

Against the Australia and the New Zealand dollars, the yen climbed to 107.75 and 93.00 from early 1-1/2-year lows of 109.00 and 94.02, respectively. The next possible upside target for the yen is seen around 105.00 against the aussie and 91.00 against the kiwi.

Looking ahead, Canada retail sales data for November and manufacturing sales data for December, U.S. S&P Global Composite PMI for January, U.S. University of Michigan's consumer sentiment index for January, U.S. Consumer Board's leading index for October and U.S. Baker Hughes oil rig count data are slated for release in the New York session.

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