The yen accelerate to its highest level in over three months against the euro and the dollar on Wednesday after Bank of Japan head Haruhiko Kuroda hinted that no monetary easing is imminent.
The dollar plunged to 100.805 yen after Kuroda noted that Japan’s economy is right on track to recover after the April’s consumption tax hike, which was predicted to have a negative effect on consumer demand.
The pound was the biggest gainer, rising to its highest level in 5 ½ years against a pool of currencies after retail sales in UK rose faster than expected. Indicators also show that Bank of England’s policymakers are likely to hike interest rates soon.
Kuroda reaffirmed that the local economy will meet the target inflation rate of 2 percent within a year from May. This means the yen needs to be propped for the foreseeable future.
Kuroda’s comments are lowering expectations of further BoJ stimulus. Investors have been long dollar/short yen so there is position squaring going on which is driving the dollar lower,” Manuel Oliveri, an FX strategist at Credit Agricole, told Reuters. “”At the same time one has to be cautious about the FOMC minutes with Yellen also due to speak later in the day.”
The euro declined 0.4 percent to trade at 138.23 yen, its weakest level since February. The shared currency also fell to 81.03 pence against the British pound, a 16-month low. The euro has taken a battering from speculation that the European Central Bank will loosen its monetary policy when it convenes in June. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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