The yen reached a one-month high against the dollar on Thursday, driven by increasing speculation that the Bank of Japan (BOJ) might end negative interest rates this month and expectations of impending U.S. rate cuts, causing downward pressure on the U.S. currency.
The Japanese currency surged over 0.5%, reaching a high of 148.56 per dollar, and also gained ground against the euro and the Australian dollar.
The euro was down 0.52% to 161.98 yen, while the Australian dollar declined 0.44% to 97.64 yen.
BOJ board member Junko Nakagawa remarked that Japan's economy was progressing steadily toward achieving the central bank's 2% inflation target. This comes a day after reports suggested that at least one BOJ board member might propose removing negative interest rates at the upcoming policy meeting.
"The potential for a pivot in March is growing," noted Hirofumi Suzuki, chief FX strategist at SMBC. "The yen looks strong in the near term."
The yen has faced pressure for the past two years due to significant interest rate differentials, with major central banks raising rates aggressively while the BOJ maintained an ultra-easy monetary policy.
A shift by the BOJ away from negative interest rates could provide support to the yen amid increasing expectations of rate cuts elsewhere, particularly from the Federal Reserve.
In the broader market, the U.S. dollar weakened as traders anticipated a possible decline in U.S. interest rates this year. Federal Reserve Chair Jerome Powell hinted at potential rate cuts later in the year, citing a need for confidence in inflation's steady deceleration.
The euro and sterling remained near one-month highs, trading at $1.0898 and $1.27305, respectively.
"Dollar weakness against the major currencies came down to both the weak labour market data... and Powell's testimony," said currency strategist Carol Kong at Commonwealth Bank of Australia.
Futures pricing suggests a 70% chance of the Fed easing rates by its June policy meeting, with approximately 87 basis points of cuts priced in for the year. The U.S. dollar index edged 0.05% lower to 103.30.
Elsewhere, the Canadian dollar remained stable at 1.3517 per U.S. dollar after the Bank of Canada (BoC) decided to keep its key overnight interest rate unchanged.
In the cryptocurrency market, bitcoin retreated slightly from its record high earlier in the week, while ether slipped 0.8% to $3,819.50 after reaching a more than two-year high in the previous session.
Paraphrasing text from "Investing" all rights reserved by the original author.
