Japanese Yen Falls As BoJ Maintains Policy Rate; Cuts Growth Forecast

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The Japanese yen dropped against its major peers in the Asian session on Friday, as the Bank of Japan left its policy rate unchanged but slashed its growth forecast for this year due to the economic fallout from the coronavirus pandemic.

The board, governed by Haruhiko Kuroda, voted 8-1, to hold the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

The bank will continue to purchase a necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent.

The BoJ provided a preliminary outline for a new-funding programme to support efforts in fields related to climate change. The bank plans to launch the measure this year and to continue until March 2031.

The bank downgraded its near-term growth projections. The economy is forecast to expand 3.8 percent in the fiscal 2021 instead of 4 percent estimated in April.

In his second day of testimony before Congress, Federal Reserve Chair Jerome Powell reiterated that the central bank will maintain its accommodative stance on monetary policy, stressing that rising inflationary pressures are transitory.

The economy remained "a ways off" from reaching "substantial further progress" toward the Fed's goals to start tapering stimulus measures, Powell said.

The yen climbed on Thursday as a surge in new infections in the Tokyo region sparked fears about a slowdown in economic growth. It rose 0.5 percent against the franc, 0.4 percent against the pound, 0.3 percent against the euro and 0.1 percent against the greenback for the day.

The yen lost 0.2 percent against the greenback, dropping to 110.07. The pair was worth 109.81 when it closed deals on Thursday. The yen may locate support around the 112 mark, should it weakens further.

The yen was down by 0.2 percent against the euro, at 129.96. The pair had finished Thursday's deals at 129.71. Next near term support for the yen is likely seen around the 131.5 level.

The Japanese yen fell by 0.2 percent to 119.82 against the franc from Thursday's closing quote of 119.62. The next likely support for the currency is seen around the 122.5 level.

The Japanese currency registered a 0.3 percent drop against the pound, with the pair trading at 152.27. The GBP/JPY pair had ended yesterday's trading session at 151.79. Extension of downward trading may see the yen challenging support around the 156.00 region.

The yen reached as low as 81.85 against the aussie, down from Thursday's trading close of 81.45. Immediate support for the yen is likely seen near the 83 level.

The yen slipped to 87.54 against the loonie and 77.27 against the kiwi, from Thursday's closing quotes of 87.17 and 76.65, respectively. The yen is likely to challenge support around 90 against the loonie and 80 against the kiwi.

Looking ahead, Eurozone CPI for June and trade data for May will be featured in the European session.

At 8:15 am ET, Canada housing starts for June are scheduled for release.

Canada wholesale sales for May, U.S. retail sales for June, University of Michigan's preliminary U.S. consumer sentiment index for July and business inventories data for May are due out in the New York session.

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