Yen hovers near 5-month low

The yen hovered near a five-month low against the dollar on Friday as the US Federal Reserve’s hawkish messaging contrasted with the Bank of Japan’s cautious approach to further policy tightening.

The yen traded at 157.765 per dollar as of 0600 GMT, edging up 0.1 per cent from Thursday, but still close to that session’s low of 158.09 per dollar, the yen’s weakest level since July 17.

Japan’s currency got little respite from a fresh warning from the country’s finance minister that the government “has been alarmed by foreign exchange developments... and will take appropriate action against excessive moves.”

A summary of opinions from the BOJ’s December policy meeting released on Friday showed some officials becoming more confident about a near-term rate increase, while others remained wary amid uncertainties over the trend for wages and the policies of US President-elect Donald Trump’s incoming administration.

BOJ Governor Kazuo Ueda said last week, after the central bank held rates steady, that it would take “considerable time” to fully gauge the outlooks for wages and overseas economies, particularly the United States.

By contrast, Fed Chair Jerome Powell said earlier this month that US central bank officials “are going to be cautious about further cuts” following an as-expected quarter-point rate reduction. Trump’s mooted looser regulation, tax cuts, tariff hikes and tighter immigration policies are seen as both pro-growth and inflationary by economists.

The dollar is on track for a 5.5% gain this month against the yen, and an 11.8% advance for the year.

“The upward trend is strong, but there’s a feeling that the strong dollar-weak yen movement we’ve seen to now is overdone and there’s the risk of pullbacks,” Mizuho Securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.