Dollar Higher Against Yen on Diverging Monetary Policy

 
   By Hiroyuki Kachi 
 

        The dollar was higher against the yen in Asian trade Friday, tracking overnight strength driven by the Federal Reserve's latest signals on monetary tightening that again showed a stark contrast with the Bank of Japan's policy stance.
        As of 0550 GMT, the dollar was at Y119.25 from Y118.79 late Thursday in New York.
        The greenback was hovering around Y119 until lunchtime, as investors avoided any major moves ahead of the outcome of BOJ policy meeting.
        As widely expected, however, the central bank decided to stand pat on monetary policy, despite a rapid fall in global oil prices that threatens its efforts to generate 2% inflation.
        The BOJ's nine-member board voted 8-1 to leave unchanged its annual asset purchase amount at Y80 trillion ($673 billion), as was expected by many economists. The BOJ is buying assets from the market to flood the banking sector and the economy with cash in the hope it will end 15 years of deflation and produce stable 2% inflation.
        After the BOJ decision, the U.S. currency quickly gained momentum to hit as high of Y119.37 in the early afternoon, exaggerated by "relatively large flows amid extremely thin turnover and strength in the stock market," said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow, adding that the buying was not incentive-backed.
        Investors are now awaiting BOJ Gov. Haruhiko Kuroda's news conference scheduled at 0630 GMT to see if he makes any remarks on Japan's slowing inflation amid tumbling oil prices.
        "Investors remain cautious to push higher," especially after the gyrations in the dollar-yen trading pair earlier this month, said Marito Ueda, director of FX Prime byGMO.
        The Fed on Thursday broached the prospect of "beginning to normalize the stance of monetary policy."
        "But investors are now a bit cautious," as the Fed stance is not something considered as keeping interest rates going up fast, said Mr. Ueda.
        Still, the downside is well supported by buying from Japanese importers for commercial trade settlements ahead of the year-end book closing, said Mr. Ueda.
        In other currency trading, the euro was at $1.2278 from $1.2285, while the common currency was at Y146.45 from Y145.91.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.04% at 82.43.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        December 19, 2014 00:07 ET (05:07 GMT)

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