Yen sharpens decline to three-month trough on BOJ remarks

Yen fell in Asian trade on Tuesday against a basket of major rivals, extending losses for a second session against the dollar and plumbing a three-month trough following remarks by BOJ officials on the future of interest rates.

The remarks were less aggressive than expected, hurting the odds of sizeable Japanese rate hikes this year. 

USD/JPY 

USD/JPY rose 0.2% today to 149.58, a November 27 high, with a session-low at 149.25. 

The pair lost 0.1% on Monday, resuming losses as US treasury yields gained ground.

Japanese Remarks 

Bank of Japan governor Kazuo Ueda said on Friday there’s a big chance that ultra-easy monetary policies will carry on even after exiting negative rates. 

His deputy, Shinichi Ushida, said it’s “difficult to imagine” the BOJ hiking rates “rapidly” even after exiting negative rates. 

Japanese Rates

Such bearish remarks hurt the odds of quick and big interest rate cuts by the BOJ this year, and maintained doubts about exiting the current policy of negative rates. 

A string of weak Japanese economic data showed that pressures on BOJ policymakers haven’t reached a level that would force them to abandon ultra-easy tools yet. 

US Treasury Yields

US 10-year treasury yields are now trading near four-week highs at 4.197%, bolstering potential demand on the dollar.

Such developments in the US bonds market came before crucial US inflation data later today for January, expected to provide fresh pricing for the odds of Fed interest rate cuts in March and May. 

 Current pricing for a Fed 0.25% interest rate cut in March stands at 13.5%, while pricing for such a cut in May stood at 57.5%.