The yen fell for a fourth day against the dollar after Bank of Japan Governor Haruhiko Kuroda reiterated his readiness to ease policy further just as the Federal Reserve spurred bets a US interest-rate increase is coming in September.
A gauge of the dollar rose to a two-week high after Fed officials fueled bets that the US central bank may lift interest rates as soon as next month. Futures indicated a 42 percent chance that the Fed will raise rates as early as next month, up from 22 percent a week earlier, with US economy watchers turning their attention to payrolls data later this week.
“The yen will underperform while Fed expectations remain high,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “The big question is how much further the dollar is boosted, which will be related to how much more hikes markets price into the remaining 2016 FOMC meetings. December is arguably almost fully priced, but there is scope for more in September and will require a strong payrolls report.”
The yen slid 0.5 percent to 102.34 per dollar as of 7:15 a.m. in London, extending a three-day 1.6 percent decline. It lost 1.3 percent on Friday, its biggest single-day drop in more than six weeks. The currency weakened against all of its Group of 10 peers. It dropped 0.5 percent to 114.61 per euro, a four-week low.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, rose 0.1 percent, having touched its highest level since Aug. 10. The Australian dollar, which marked its first back-to back weekly slide since May last week, slipped 0.2 percent to 75.48 US cents.
Fed Chair Janet Yellen said at a central bank retreat in Jackson Hole, Wyoming, that the case for tightening US monetary policy had strengthened, a message later reinforced by Vice Chairman Stanley Fischer, who said a rate increase in September is possible. Speaking at the same symposium, Kuroda said there’s “ample space for additional easing” and he would bolster stimulus without hesitation.
The US economy added 180,000 jobs in August, according to the median estimate of a Bloomberg survey before Friday’s payrolls data. The monthly labor force number has exceeded expectations in the past two readings pointing to renewed vigor in the employment market.
The premium for one-month options to buy the yen versus the dollar, over the cost of contracts to sell, tumbled to 0.1 percentage points, the least bullish since November, according to risk-reversal prices compiled by Bloomberg.
“The threat of the yen making a sustained move below 100 has diminished post Yellen’s Jackson hole speech,” said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. in Sydney. “A bold and innovative BoJ is still needed if the yen is to end-2016 at or above 105 per dollar”
The Fed and the BOJ have their next policy meeting on Sept. 20-21.