Yen edges up as traders doubt BOJ’s firepower – 20 Sep, 2016
The yen edged up against the dollar on Tuesday as traders doubted that the Bank of Japan will be able to meaningfully weaken the yen when it meets on Wednesday, and betted that the U.S. Federal Reserve will not raise interest rates.
The yen rose 0.1 percent against the dollar to trade at 101.82 yen, having risen almost 20 percent over the past 12 months despite the BOJ’s best efforts to weaken it.
The dollar was flat against a basket of major currencies at 95.95.
Esther Reichelt, a currency strategist at Commerzbank Frankfurt said she expected a quiet day, though thin trading volumes could lead to some exaggerated moves not driven by fundamental factors.
“Everybody is just waiting for the BOJ and the Fed – why do anything today?” she said. “Everyone has already positioned for these events and there is no new information that could give them a reason to reposition, so I expect a rather calm day.”
BOJ officials have suggested in recent weeks that there is room to cut interest rates further, having taken them into negative territory for the first time earlier this year despite criticism that they are hurting financial institutions and even damaging economic sentiment.
The central bank has acknowledged the potential costs of unorthodox policy, prompting speculation that it will probably seek to steepen the yield curve to mitigate the impact of negative rates on financial institutions.
Yet currency market players are not so sure such a step would help to reverse the yen’s rally, amid a growing sense that the BOJ may be running out of ammunition.
Source: Reuters