Dollar rises vs yen as Bank of Japan keeps policy steady

LONDON: The dollar hit a nine-day high against the yen on Thursday, after comments by Bank of Japan Governor Haruhiko Kuroda reinforced expectations that the BOJ was in no hurry to move away from its ultra-loose monetary policy.

Some investors had expected hints that policy might be coming to an end and that the BOJ's yield target for Japanese government bonds might be raised, after a recent speech by Kuroda that referred to the negative effects of ultra-expansionary monetary policy.

But speaking after the BOJ kept interest rates steady as widely expected, Kuroda said his earlier reference to a "reversal rate" did not indicate a change in his thinking on monetary policy.

Kuroda also said the BOJ would continue patiently with monetary easing as inflation was still well off its 2 percent  target and that he did not see a need to review the BOJ's yield curve control policy.

The dollar rose 0.2 percent to 113.635 yen in an otherwise Christmas-thinned market, having traded around 113.40 yen ahead of Kuroda's news conference.

"I think Kuroda was misunderstood by all those who had taken (his earlier comments) as a hint for an imminent change in policy," said Commerzbank currency strategist Ulrich Leuchtmann, in Frankfurt.

"The Bank of Japan has long promised ... that it will continue its QE policy until inflation exceeds the 2 percent target," he added. "It would be quite unusual - to put it mildly - to execute a U-turn in monetary policy at a time like this."

The greenback has gained 0.8 percent against the yen so far this week, and a rise beyond last week's high of 113.75 yen would send it to its highest point in more than a month.

"Dollar/yen will probably continue to take cues from moves in U.S. Treasuries," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

The dollar could edge higher versus the yen, if the U.S. 10-year yield rises further after it set nine-month highs this week, Okagawa added.

The Republican-controlled U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping bill to President Donald Trump to sign.

Analysts said the dollar was supported against the yen after the U.S. 10-year Treasury yield rose to a nine-month high on Wednesday as investors worried the U.S. tax overhaul could lead to higher U.S. debt, increased bond issuance and more aggressive rate hikes by the Fed.

The dollar edged up 0.1 percent against a basket of major currencies.

The euro held steady at $1.1874, having gained around 1 percent so far this week, supported by a rise in German bond yields.