Possible BOJ Policy Change Causes Yen To Slide

London: 11 December 2023 (TraderMade): The Japanese yen weakened against the US dollar on Monday after a report indicated that the Bank of Japan (BOJ) is unlikely to end its negative interest rate policy in December, contrary to market expectations.

Key Takeaways

• The USDJPY exchange rate rose by 0.81% to 146.1735 (at 09:58 AM GMT), reversing earlier losses sparked by anticipation of a potential BOJ policy shift.
• A Bloomberg report cited sources familiar with the matter that BOJ officials haven't observed sufficient evidence of robust wage growth to warrant ending negative interest rates this month.
• The prospect of continued loose monetary policy in Japan strengthened the dollar, pushing the USD index up by 0.09% to 104.0575.

Attention shifts towards crucial economic data releases this week, including US inflation figures on Tuesday and the Federal Reserve's interest rate decision on Wednesday. The European Central Bank and Bank of England are also scheduled to announce their rate decisions on Thursday.

Data released over the weekend revealed that China's consumer prices declined at the fastest rate in three years in November while factory-gate deflation deepened. This data fueled concerns about weakening domestic demand and the potential for continued deflationary pressures in China. The Chinese yuan depreciated to a three-week low in both onshore and offshore markets, with the onshore yuan trading at 7.1163 per dollar.

Overall, the Yen's (JPY) decline reflects reduced expectations of an imminent BOJ policy shift, while the Yuan's (CNY) weakness is attributed to concerns about deflationary pressures in China.