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Yen rises on imminent BOJ pivot


The Japanese yen gained over 0.5% against the dollar, reaching a high of 148.56 yen per dollar

The dollar was pushed down by the yen, which reached its highest level in a month on Thursday. Speculation that the Bank of Japan (BoJ) may end negative interest rates soon, along with expectations of imminent rate cuts by the US, contributed to dollar’s decline.

The Japanese yen gained over 0.5% against the dollar, reaching a high of 148.56 yen per dollar. It also made gains against the euro and the Australian dollar.

The euro fell by 0.52% to 161.98 yen, while the Australian dollar dropped by 0.44% to 97.64 yen.

BoJ board member Junko Nakagawa stated on Thursday that Japan’s economy is steadily moving towards achieving the central bank’s 2% inflation target in a sustainable manner. This comes just a day after the Jiji news agency reported that at least one of the central bank’s nine board members is likely to suggest removing negative interest rates at this month’s policy meeting.

The potential for a March pivot is growing, said Hirofumi Suzuki, chief FX strategist at SMBC.

Nakagawa’s comments do not negate this view. As a result, the yen is appreciating, continuing the trend from yesterday. The yen looks strong in the near term, Suzuki said.

The yen has been under pressure for the past two years due to significant differences in interest rates. While major central banks have been aggressively raising rates to control inflation, the BoJ has maintained an ultra-easy monetary policy stance, making it an outlier.

If the BoJ moves away from negative interest rates, it would coincide with increasing expectations of rate cuts by other central banks, particularly the Federal Reserve. This would provide much-needed support to the struggling Japanese currency.

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