Tokyo, 16 June, /AJMEDIA/
The U.S. dollar rose to a seven-month high above the 141 yen line Thursday in Tokyo, after a hawkish forecast by the U.S. Federal Reserve fanned speculation that the interest rate gap between Japan and the United States will widen.
The dollar firmed further in the afternoon, hitting a high of 141.50 yen, after the Fed on Wednesday signaled interest rate increases following a pause at its latest meeting.
The euro also rose, hitting a 15-year high around the 153 yen line, its highest level since September 2008, dealers said. The European Central Bank is expected to further raise interest rates at its policy meeting later in the day.
At 5 p.m., the dollar fetched 141.28-30 yen compared with 140.05-15 yen in New York and 139.98-140.00 yen in Tokyo at 5 p.m. Wednesday.
The euro was quoted at $1.0826-0827 and 152.95-99 yen against $1.0827-0837 and 151.70-80 yen in New York, and $1.0788-0790 and 151.02-06 yen in Tokyo late Wednesday afternoon.
While the U.S. Federal Open Market Committee decided to skip a rate increase in June as expected, it projected its key rate will rise to 5.6 percent by the end of 2023, up from 5.1 percent estimated in March, meaning a couple of more hikes are likely this year.
The Bank of Japan, however, is widely expected to stick to its powerful monetary easing following its two-day meeting through Friday, underscoring the diverging policies of Japanese, U.S. and European central banks, dealers said.
“Preemptive selling of the yen appeared to be taking place before the BOJ announcement,” said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.
The dollar was further buoyed from the morning by domestic importers that bought the U.S. currency for settlement purposes, fueling speculative yen selling, Ishizuki added.
“The yen seems to be weak against various currencies, not only against (the dollar) and euro. This discrepancy in monetary policy direction is specific to Japan, which makes the yen relatively easy to sell, especially for foreign investors,” Ishizuki said.
The yield on the benchmark 10-year Japanese government bond closed at 0.425 percent, unchanged from Wednesday, as investors took a wait-and-see stance ahead of the outcome of the BOJ meeting.
On the stock market, the Nikkei and Topix indexes snapped their four-day winning streaks to end almost flat amid directionless trading after the Fed decision.
The 225-issue Nikkei Stock Average ended down 16.93 points, or 0.05 percent, from Wednesday at 33,485.49. The broader Topix index finished 0.56 point, or 0.02 percent, lower at 2,293.97.
Decliners were led by pharmaceutical, retail, and pulp and paper issues.
Losses in Nikkei heavyweights contributed significantly to the benchmark index’s decline, with Fast Retailing, operator of the Uniqlo clothing chain, falling 370 yen, or 1 percent, to 36,570 yen, and Softbank Group dropping 118 yen, or 1.8 percent, to 6,492 yen.
Meanwhile, travel agency H.I.S. climbed 119 yen, or 6.1 percent, to 2,063 yen after reporting Wednesday it had narrowed losses in the six-month period through April from a year earlier on the back of increased travel demand following the easing of COVID-19 restrictions.
