Yen Falls as Nikkei Jumps, Central Bank Meetings Approach

By Kevin Buckland

TOKYO (Reuters) – The yen fell on Monday after a week in which it reached its strongest level in 12 weeks against the dollar, as a rally in equity markets sapped demand for the currency as a safe haven.

The elimination of long-held yen short positions also appeared to have ended at the end of last week, with traders now looking to central bank decisions in Japan and the US on Wednesday for further guidance.

Sterling remained steady near a two-and-a-half week low against the euro ahead of the Bank of England’s monetary policy announcement on Thursday.

The dollar rose 0.29% to 154.24 yen at the start of the Asian day, after falling to 151.945 on Thursday for the first time since May 3.

Last week, the dollar sank 2.36% against the yen, its worst weekly performance since late April.

On Monday, Japan’s Nikkei stock average jumped more than 2%.

Speculation has grown that the Bank of Japan will raise interest rates on Wednesday while significantly reducing its monthly bond purchases. It had promised to outline its quantitative tightening (QT) plans at this meeting during its previous meeting last month.

“If the Bank of Japan delays raising rates, it will need to announce a more aggressive QT program than expected to avoid a ‘sell the rumor, buy the fact’ reaction… in USD/JPY,” said Tony Sycamore, market analyst at IG.

Meanwhile, the Federal Reserve is expected to keep rates unchanged this week but cut them by a quarter point at its next meeting in September.

Demand for the yen could easily reignite if stocks also fall, with the US earnings calendar this week packed with heavyweights including Amazon, Apple, Meta and Microsoft.

The euro rose 0.25% to 167.37 yen and was stable at $1.0859.

It fell 0.07% to 84.32 British pence, not far from Friday’s high of 84.48 pence, the strongest since July 10.

The British pound rose 0.12% to $1.2882.

Markets view the chances of a first rate cut on Thursday as a toss-up.

Elsewhere, the Australian dollar gained 0.31% to $0.6568, recovering from Friday’s low of $0.65105, a level not seen since early May.

Top cryptocurrency bitcoin rose 2% to $68,793, receiving some support from positive comments from Republican presidential candidate Donald Trump, who told a bitcoin conference on Saturday that the US must dominate the sector or China will. .

(Reporting by Kevin Buckland; Editing by Jacqueline Wong)