On Friday, the Japanese yen weakened against the dollar following a Reuters report suggesting that the Bank of Japan (BoJ) is likely to maintain its key yield control policy unchanged in the upcoming week’s meeting, amidst a busy schedule of central bank meetings in the U.S. and Europe.
BoJ policymakers reportedly prefer to gather more data to ensure sustained wage and inflation growth before considering any policy changes. However, there is no consensus within the central bank, making the decision a potentially close call.
While market expectations anticipate the BoJ to maintain yield curve control and interest rates unchanged, there remains a possibility of surprises. The recent data showed Japan’s core inflation at 3.3%, surpassing the BoJ’s 2% target for over a year.
As a result of these developments, the dollar strengthened by 1.24% against the yen, reaching the highest level since July 10. Investors speculate whether the BoJ will tweak yield curve control during the July 27-28 meeting, given the country’s higher-than-expected inflation.
Furthermore, central bank meetings from the U.S. and Europe are also scheduled next week, with expectations of rate hikes by both the Federal Reserve and the European Central Bank by 25 basis points. Investors will closely watch comments from Fed Chair Jerome Powell for clues on the future rate path.
The dollar index, tracking the greenback against major peers, rose 0.30%, experiencing its most substantial weekly gain in two months. Meanwhile, the euro declined slightly against the dollar, and the pound extended its losing streak for the sixth consecutive day, facing its most significant weekly fall since early February.
