Yen stages a partial recovery as BOJ hikes, intervention risks weighed

TOKYO: The yen recovered some ground on Monday following a steep drop at the end of last week as markets weighed the timing of more interest rate hikes in Japan and the possibility of intervention in thin end-of-year trading.

Bank of Japan policymakers debated the need to continue raising rates, a summary of opinions at their policy meeting in December showed on Monday.

The euro was supported after US President Donald Trump signalled optimism in talks to reach a peace deal to end the war in Ukraine.

Japan has a free hand in dealing with excessive moves in the yen, Finance Minister Satsuki Katayama said last week.

Those intervention warnings have helped keep a lid on dollar-yen positions, but pessimism about Japan’s currency is showing up in other foreign exchange crosses, said Bart Wakabayashi, Tokyo branch manager at State Street.

“I think a long position in yen is quite painful,” Wakabayashi said. “We’re seeing some expression of yen shorts against these currencies, particularly Aussie-yen.”

“The market is still trying to figure out what kind of role the yen plays now in terms of being a safe haven,” he added.

The yen strengthened 0.3% against the greenback to 156.13 per dollar after a 0.5% slide on Friday.

The dollar index , which measures the greenback against a basket of currencies, fell 0.1% to 97.96.

The euro advanced 0.1% to $1.1780.

The BOJ raised its policy rate to a 30-year high of 0.75% from 0.5% at its December meeting. The summary of opinions released on Monday showed many board members saw the need for further increases to the rate, which remained significantly negative in inflation-adjusted terms.

President Trump said on Sunday that he and Ukrainian President Volodymyr Zelenskiy were “getting a lot closer, maybe very close” to an agreement to end the war in Ukraine, though both leaders acknowledged that some of the thorniest details remain unresolved.

The two leaders spoke at a joint press conference late Sunday afternoon after meeting at Trump’s Mar-a-Lago resort in Florida. Trump said it will be clear “in a few weeks” whether negotiations to end the war will succeed.

In a thin economic calendar this week, the main focus will be minutes released on Tuesday from the Federal Open Market Committee’s December meeting.

The Australian dollar was little changed at $0.6714. New Zealand’s kiwi was steady at $0.5830.

In cryptocurrencies, bitcoin gained 0.6% to $88,083.23, while ether climbed 1.1% to $2,967.20.