TOKYO (Reuters) -The yen hovered near a five-month low against the dollar on Friday as the U.S. Federal Reserve’s hawkish messaging contrasted with the Bank of Japan’s cautious approach to further policy tightening.
The yen traded at 157.765 per dollar as of 0600 GMT, edging up 0.1% from Thursday, but still close to that session’s low of 158.09 per dollar, the yen’s weakest level since July 17.
Japan’s currency got little respite from a fresh warning from the country’s finance minister that the government “has been alarmed by foreign exchange developments … and will take appropriate action against excessive moves.”
A summary of opinions from the BOJ’s December policy meeting released on Friday showed some officials becoming more confident about a near-term rate increase, while others remained wary amid uncertainties over the trend for wages and the policies of U.S. President-elect Donald Trump’s incoming administration.
BOJ Governor Kazuo Ueda said last week, after the central bank held rates steady, that it would take “considerable time” to fully gauge the outlooks for wages and overseas economies, particularly the United States.
By contrast, Fed Chair Jerome Powell said earlier this month that U.S. central bank officials “are going to be cautious about further cuts” following an as-expected quarter-point rate reduction.
Trump’s mooted looser regulation, tax cuts, tariff hikes and tighter immigration policies are seen as both pro-growth and inflationary by economists.
The dollar is on track for a 5.5% gain this month against the yen, and an 11.8% advance for the year.
“The upward trend is strong, but there’s a feeling that the strong dollar-weak yen movement we’ve seen to now is overdone and there’s the risk of pullbacks,” Mizuho (NYSE:MFG) Securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.
“There’s also the possibility of firmer intervention warnings from Japanese officials.”
The U.S. dollar index, which measures the currency against the yen, euro, sterling and three other major rivals, ticked up 0.08% to 108.16. It has been essentially in a holding pattern around 108 all week, with many traders on holiday around Christmas and the New Year.
For the month, the index is up 2.2%. It has rallied 6.7% so far in 2024.
The euro eased 0.13% to $1.04085, heading for a 1.6% decline for December. Sterling edged down 0.07% to $1.2519 on the day, on track for a 1.7% slide for the month.
South Korea’s won dropped to a fresh 16-year-low of 1,486.7 per dollar, with the country’s acting president facing an impeachment vote later in the day.
The Chinese yuan was set to end the week near a 13-month low against the dollar, trading at 7.2988 per dollar in the onshore market, right on the cusp of the closely watched 7.3 level. The currency has suffered under the threat of additional U.S. tariffs on Chinese goods under Trump.
Leading cryptocurrency bitcoin added 0.5% to $96,165, slipping slightly this month, but after touching a record high of 108,379.28 on Dec. 17. It has surged about 126% so far this year.
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