© Reuters.
Investing.com – The yen rose broadly on Friday on news that Kazuo Ueda is set to become the next Bank of Japan (BOJ) governor, but the yen pared gains after Ueda said the central bank’s current monetary policy is appropriate.
University of Michigan polls showed the one-year inflation forecast at 4.2%, higher than the final figure in January. The overall index of consumer confidence came in at 66.4, up from 64.9 in the previous month. Federal Reserve Chairman Jerome Powell cited inflation expectations in the Michigan poll as one of the indicators the central bank tracks.
Japan’s economic situation
In Japan, the Nikkei earlier reported that the government would nominate academic Ueda to a higher position at the Bank of Japan, which sent the yen higher as markets anticipated a possible early end to ultra-loose monetary policy.
But in comments broadcast online by Nippon TV, Ueda said the central bank’s current loose monetary policy was appropriate and should continue, pushing back the gains made by the yen.
Japanese Prime Minister Fumio Kishida said the government plans to present its candidate for governor of the Bank of Japan to parliament on Tuesday, but he did not respond to a question about whether Ueda would be nominated.
“It would be really amazing if there were big hawkish changes at the Bank of Japan,” said Juan Perez, director of trading at Monex USA in Washington. He added, “We see that money attracts differently, but the yen is rising on the possibility of deflationary measures.”
It fell to as low as 129.8 yen, its lowest level in one week, and was last down 0.5% to 130.92 yen.
Both the pound and the pound were down more than 1% against the Japanese currency, prior to which they were down nearly 0.8%, at 140.13 yen and 158.23 yen, respectively. The Australian dollar fell 0.5% to 90.78 yen.
The Bank of Japan shocked the markets in December when it raised the yield ceiling on 10-year government bonds to 0.5% from 0.25%, doubling the range it would allow to swing above or below its target of zero.
Since then, speculation has been mounting that the Bank of Japan could adjust or cancel its yield curve control policy, although it refrained from making any changes at its last meeting.
Bank of Japan Deputy Governor Masayoshi Amamiya was the first candidate to replace incumbent Governor Haruhiko Kuroda, but the Nikkei reported that he turned down the position.
James Malcolm, head of foreign exchange strategy at UBS, said Ueda’s prospective candidacy should be seen as “tightening”, given Ueda’s previous criticism of the Bank of Japan’s monetary policy from 2016.
“I’m surprised USDJPY hasn’t already reached 129,” said Malcolm.
He added, “Perhaps this is just a consequence of people not knowing who these characters are. For me, the result would be as tough as having Mr. Yamaguchi in the role of prefect.”
Hirohide Yamaguchi, former Deputy Governor of the Bank of Japan, was also in the running for a higher position and was previously an outspoken critic of the Bank of Japan’s stimulus program.
The dollar index, which tracks the greenback against the yen and five other currencies, rose 0.1% to 103.32. For the week, the index was on track to gain 0.4%, which would be the second consecutive positive week of gains, something it has not achieved since October.
“We’re on the bearish side of the dollar as the year progresses, but don’t forget bullishness and resistance as some mayhem here and there,” said Perez of Monex.
The pound settled at $1.2112 after Britain managed to avoid a technical recession, as the economy showed zero growth in the last three months of 2022.
The euro fell 0.4 percent to $1.0699, posting losses for the second week in a row.
Meanwhile, the Norwegian krone strengthened against the euro, dropping 0.8% to 10.8382 after Norway’s core inflation rate jumped in January to an all-time high.
