- The Japanese Yen (JPY) was flat on Friday
- BoJ left rates unchanged, but the vote was more hawkish
- The US Dollar (USD) rose versus its major peers
- USD is down 10% this year as stocks hit a record high
The US dollar Japanese yen (USD/JPY) exchange rate was unchanged on Friday, snapping a two-day winning run. The pair rose 0.69% in the previous session, settling on Thursday at 148.00. On Friday at 21:30 UTC, USD/JPY settled -0.02% at 147.97 and traded in a range of 148.00 to 148.30. The pair rose 0.2% across the week.
The yen held up against the USD on Friday after the Bank of Japan left interest rates unchanged but started to sell its holding of risky assets.
The BoJ kept rates at 0.5% with two policymakers voting for a 25 basis point hike. The more hawkish vote could be seen as a prelude to a near-term increase in borrowing. The hawkish sift surprised the market and has led some market players to speculate over a rate hike next month.
The US dollar was flat against the yen but rising against major peers. The US dollar index, which measures the USD against a basket of peers, rose 0.31% on Friday at 97.64 marking three days of gains. The USD rose 0.1% across the week, having recovered from a 4-year low on Wednesday.
The US dollar managed to book modest gains last week, but the USD trades 10% lower against its major peers this year, with another quarter still to go. This already makes it the weakest year for the reserve currency of the world in over two decades.
Interestingly, the US dollar weakness comes as US stocks trade at record highs, so this is not the result of a mass selloff of US assets. Instead, as noted by Deutsche Bank’s George Saravelos, investors are still buying into US stocks, but as they buy US stocks, they sell US dollars to neutralise the risk.
This comes at a time when the Federal Reserve has restarted its rate-cutting cycle, while other central banks are ending or almost ending rate-cutting cycles.
