Yen Declines as BOJ Remains Dovish

The dollar was aiming to recover from losses early in the week, hoping that the Federal Reserve may hint at slowing its aggressive rate hikes, while the yen declined on Friday as the Bank of Japan maintained its dovish stance.

The BOJ maintained its -0.1% target for short-term interest rates and its promise to steer the 10-year bond yield around 0%, as anticipated, and the dollar was last up 0.9% against the yen at 147.64.

With investors feeling a little more cautious, the dollar was stronger against the euro and pound, which traded down 0.2% to $0.9947 and down 0.24% to $1.1536, respectively.

The euro recovered after its 1% decline the day before when markets interpreted the European Central Bank’s 75 basis point rate hike as sending a dovish message.

Before the FOMC meeting that sets interest rates next week, data on American consumer spending and labor costs will be public on Friday.

However, as a result of advances earlier in the week, both the euro and sterling should rise against the dollar for the third consecutive week, the longest such streak for the pound since February.

Harvey ascribed this to investors holding dollars while waiting for an opportunity to re-enter the market, which they had discovered earlier this week and the week before.

Even if forecasts are still anticipating a 75 basis point rate hike at the FOMC meeting next week, this trend was partly influenced by anticipation that the Fed will pause its aggressive rate-hike pace in December.

Following an overnight decline of more than 1%, the euro was last trading 0.05% down at $0.9960 after the ECB boosted rates by 75 basis points as anticipated but adopted a more pessimistic view of interest rates.

Sterling dropped 0.12% to $1.155 in another trade.