Yen gains as some BOJ policymakers see rate hike soon

By Karen Brettell

NEW YORK (Reuters) – The Japanese yen rose off a five-month low against the dollar on Friday after a summary of opinions from the Bank of Japan’s December policy meeting showed some policymakers gaining confidence in an imminent rate increase, while the Japanese central bank also cut its monthly bond purchases.

Some Bank of Japan policymakers saw conditions falling into place for an imminent rate hike with one predicting a move “in the near future,” keeping alive the chance of a January hike.

The BOJ held interest rates steady at 0.25% at this month’s meeting, a move governor Kazuo Ueda explained as aimed at scrutinizing more data on next year’s wage momentum and clarity on the incoming U.S. administration’s economic policies.

The Bank of Japan will cut monthly Japanese government bond (JGB) purchases by another 410 billion yen per month ($2.6 billion), lowering the total to about 4.5 trillion yen per month from January.

The Japanese currency has weakened in recent weeks as U.S. Treasury yields rise despite the Federal Reserve cutting rates by 100 basis points since September.

Traders are pricing in the likelihood that the U.S. central bank will make fewer cuts next year as inflation remains elevated. Analysts say the policies of the new Donald Trump administration next year are also expected to boost growth and inflation, making traders wary of betting against the greenback.

But some see the Japanese currency as staging a comeback against the dollar eventually, with Treasury yields likely to decline.

“The prospect of BoJ rate hike in the first quarter of next year¦ and a drift lower in Treasury yields in H2 2025, suggest the USD/JPY fair value is peaking around now and will be in the mid-130s by the end of next year,” Societe Generale analyst Kit Juckes said in a recent report.

Traders are also on watch for any potential intervention by Japanese officials to shore up the currency if it continues to weaken, as they have done multiple times this year.

Japan Finance Minister Katsunobu Kato on Friday reiterated concerns over a sliding yen, repeating his warning to take action against excessive currency moves.

The dollar was last down 0.15% at 157.76 Japanese yen. It reached 158.09 on Thursday, the highest since July 17, and is on track for a yearly gain of 11.9% against the yen.

The U.S. dollar index fell 0.08% to 107.99. It reached a two-year high last Friday of 108.54 and is on pace for a yearly increase of 6.5%.

The euro gained 0.07% to $1.0429, but is heading for a yearly decline of 5.5%. Sterling strengthened 0.25% to $1.2556 and is on track for a yearly loss of 1.3%.

The Chinese yuan was near a 13-month low, trading at 7.2988 per dollar in the onshore market. The currency has suffered under the threat of additional U.S. tariffs on Chinese goods under Trump.

South Korea’s won dropped to a 16-year low of 1,486.7 per dollar after parliament impeached acting President Han Duck-soo, plunging the country deeper into political chaos.

Cryptocurrency bitcoin rose 0.72% to $96,378. It has surged about 126% this year.

(Reporting by Karen Brettell; Additional reporting by Kevin Buckland and Greta Rosen Fondahn; Editing by Chizu Nomiyama)