Wednesday, 15 July 2015 12:04
TOKYO: The yen edged lower Wednesday as Japan’s central bank cut its annual growth and inflation forecasts for the world’s third-largest economy, boosting the odds of more monetary easing measures this year.
In Tokyo trading, the dollar ticked up to 123.44 yen from 123.38 yen in New York where it had weakened following disappointing US retail sales data.
The euro rose to 135.86 yen from 135.82 yen in US trade, while it edged down to $ 1.1003 from $ 1.1008 as Greece prepares for a parliamentary vote on tough reforms demanded by eurozone creditors in exchange for a huge new bailout. The Bank of Japan’s downgrade suggested second-quarter growth would be weak, and ups the chances that policymakers will expand their record asset-buying plan later this year.
The weaker forecasts set off “limited yen selling because the bank could eventually take more action”, said Yuji Saito, executive director of foreign exchange at Credit Agricole.
“There is no incentive to buy the yen,” he told Bloomberg News.
The dollar’s rebound came as dealers turn their focus to Federal Reserve chief Janet Yellen’s twice-yearly appearance at Congress for more clues about monetary policy, with expectations for an interest rate hike by September.
The Fed boss has in the past said she sees rates normalising by the end of the year, and the case for such a move increased Monday with Greece’s bailout reform deal that keeps it in the eurozone.
Fed policymakers has been concerned about announcing a hike while there was the possibility of a Greek euro exit, which would hit the global economy.
But following a weak batch of US retail sales data on Tuesday, investors are keen to see if an interest rate hike is still on track for this year.
Some analysts have pushed the forecast for a hike from September to December, or beyond.
“The US data was surprisingly soft overnight, with retail sales dropping unexpectedly… More focus on Yellen tonight,” National Australia Bank said in a commentary.
