Yen's Longest Rally in a Year Falters as BOJ October Meets Loom

  • BOJ expected to stand pat Wednesday, easing may come Oct. 30
  • Traders reduce bets on Fed interest-rate increase in 2015

The yen’s gains versus the dollar are faltering as the Bank of Japan holds its first of two policy meetings this month, with markets focusing on whether the central bank will signal a willingness to further ease policy amid global economic slowdown and deflationary pressures.

The Japanese currency paused Wednesday after gaining against the greenback on Tuesday when the dollar’s broad gauge posted its longest slide since the market turmoil of August, with last week’s jobs data fueling speculation the Federal Reserve won’t raise interest rates this year. Japan’s currency is little changed since Sept. 30 after posting its first two-month gain since June 2014. San Francisco Fed President John Williams, for a third time in just over a week, reiterated on Tuesday his support for a liftoff in 2015. The yen has benefited less than many peers from dollar weakness amid speculation the BOJ will ease later this month.

“The near-term focus among major currencies is the BOJ,” said Yujiro Goto, a currency strategist at Nomura Holdings Inc. in London. “With market sentiment turning against a Fed hike, the focus is whether other central banks including the BOJ would also turn dovish. The BOJ may not be able to sustain bullish stance so the dollar’s downside against the yen would be limited.”

The yen was little changed at 120.30 per dollar as of 10:34 a.m. in Tokyo. It gained 0.2 percent on Tuesday. Over the past month, the dollar has risen about 0.8 percent against the yen while losing about 0.9 percent against the euro.

Dollar Index

Bloomberg’s Dollar Spot Index, which tracks the currency versus 10 major peers, was up 0.1 percent to 1,202.04, halting four days of declines that was the lengthiest stretch since the Aug. 19-24 slide that came as China’s devaluation caused a global financial rout.

The BOJ is expected to announce no policy changes when it concludes a two-day meeting on Wednesday in Tokyo. Fifteen of 36 economists forecast the bank will add to its already unprecedented easing at the meeting on Oct. 30, a Bloomberg survey showed.

“A lack of any dovish signals at Wednesday’s meeting could see the JPY regain some ground vs. the USD,” BNP Paribas SA strategists including Daniel Katzive, head of foreign-exchange strategy for North America, said in a report.

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