Yen extends recovery before Powell's remarks

The Japanese yen rose in the Asian market on Tuesday against a basket of major and minor currencies, continuing its recovery for the third consecutive day from a two-week low against the US dollar, benefiting from the decline in the US currency ahead of Federal Reserve Chair Jerome Powell’s speech.

The odds of a Japanese interest rate hike in October retreated, following less aggressive comments from Bank of Japan Governor Kazuo Ueda, while awaiting more evidence on the path of monetary policy normalization in the world’s fourth-largest economy.

Price Overview

• Yen exchange rate today: The dollar fell against the yen by 0.1% to (¥147.60), from the opening price today at (¥147.71), and recorded the highest level at (¥147.77).

• The yen ended Monday’s trading up by about 0.2% against the dollar, in a second daily gain in a row, after earlier touching a two-week low at ¥148.38.

US Dollar

The US dollar index fell on Tuesday by 0.1%, extending its losses for a second straight session, moving away from a two-week high at 97.82 points, reflecting the continued decline of the US currency against a basket of global currencies.

Aside from correction and profit-taking, the US dollar is weakening ahead of Federal Reserve Chair Jerome Powell’s speech later today, which is expected to provide new evidence on the likelihood of further US interest rate cuts during the remainder of this year.

Japanese Interest Rates

• Bank of Japan Governor Kazuo Ueda said on Friday: attention must be paid to the impact of trade policies on financial markets, foreign exchange markets, as well as on Japan’s economy and prices.

• Ueda added: the Bank of Japan will continue to raise interest rates if the economy and prices move in line with expectations, in accordance with improvements in economic and price conditions.

• Following Ueda’s comments, pricing of the odds of the Bank of Japan raising interest rates by a quarter point in the October meeting declined from 75% to below 50%.

• To reprice those odds, investors await further data on inflation, unemployment, and wages in Japan.