Yen struggles before BOJ decision; dollar stalls ahead of jobs data
By Brigid Riley
TOKYO (Reuters) – The yen remained under pressure on Thursday as the Bank of Japan looked set to keep ultra-low interest rates steady, while the U.S. dollar paused ahead of jobs data later this week and the U.S. presidential election next week.
The Japanese currency has taken a beating this month as the dollar and U.S. Treasury yields have hovered around their highest since July.
The yen is down nearly 6.3% for the month, putting it on track for what would be its biggest monthly loss against the greenback since November 2016.
Japan’s political shakeup has only added to the yen’s woes, heightening uncertainty about the country’s fiscal and monetary policy outlook.
The BOJ is widely expected to stand pat on Thursday and signal a cautious approach, as political uncertainty and jittery markets cloud the outlook.
Still, analysts are divided over the prospect of additional hikes by the year-end, putting focus on BOJ Governor Kazuo Ueda’s post-meeting briefing for clues on the pace and timing of further rate increases.
The yen was down 0.11% at 153.24 versus the dollar, not far off a three-month low of 153.885 hit on Monday.
“Any strengthening of the yen at present would likely result from a general weakening of the U.S. dollar if interest rates begin to align,” said Sean Teo, a sales trader at Saxo.
Still, the recent decline in the yen may be making many traders cautious given that excessive weakening could grab the attention of Japanese authorities, he added.
Markets will get more economic data from China ahead of the BOJ’s decision, with the country’s manufacturing PMI set for release in the Asian morning.
Economists polled by Reuters expect National Statistics Bureau’s manufacturing PMI to come in at 49.9, showing that factory activity contracted in October for a sixth month.
The offshore yuan last traded at 7.1269.
JOBS REPORT, PRESIDENTIAL ELECTION IN FOCUS
U.S. nonfarm payrolls closes out the week on Friday in the run-up to the presidential election on Tuesday.
Some investors have been putting on trades betting Republican candidate Donald Trump will win, although he is still neck and neck with Vice President Kamala Harris in several polls.
U.S. private payroll growth surged in October, overcoming fears of temporary disruptions from hurricanes and strikes.
Meanwhile, separate data showed the U.S. economy grew at an annualised rate of 2.8% in the third quarter, slightly lower than the 3% expected by economists.
“Data overnight reaffirmed the underlying strength of the U.S. economy, largely supporting what’s already built into the price rather than providing a fresh catalyst for a renewed push higher,” Westpac analysts wrote in a note.
The dollar index, which measures the currency against six major rivals, was little changed at 104.09, after softening the previous day. It hit its highest since July 30 at 104.63 on Tuesday.
The euro was mostly flat at $1.0859. Regional inflation data and euro zone GDP came in stronger than expected on Wednesday, leading traders to trim back bets on an outsized rate cut from the European Central Bank in December.
Sterling stood at $1.2957, down 0.03% so far on the day.
Elsewhere, the Australian dollar fetched $0.65726 ahead of September retail sales figures out in the Asian morning.
The New Zealand dollar ticked down 0.02% to $0.5974.