The Japanese yen rose in Asian trading on Monday at the start of the week against a basket of major and minor currencies, moving into positive territory versus the US dollar amid strong safe-haven demand fueled by concerns over global financial stability.
The Bank of Japan meets later this week to discuss the appropriate monetary policy for the worlds fourth-largest economy, with expectations it will keep interest rates unchanged for the fifth consecutive meeting.
Price Overview
USD/JPY today: the dollar fell about 0.2% against the yen to 147.39 from the opening level of 147.65, after hitting a high of 147.77.
The yen ended Friday down about 0.3% versus the dollar, its second loss in three days, pressured by weak prospects for a Japanese rate hike.
Over the past week, the yen lost 0.2% against the dollar, its third straight weekly decline, amid mounting political uncertainty in Japan following Prime Minister Ishibas resignation.
Financial Concerns
Fitchs downgrade of Frances sovereign credit rating on Friday to its lowest ever sparked broad concern in global financial markets. The loss of AA- status for the eurozones second-largest economy is seen as a troubling sign of Europes fragile fiscal situation.
The downgrade reflects a mix of domestic political tensions and surging public debt, increasing pressure on European bond markets and raising investor fears of contagion to other economies in the bloc.
Traders have recently dumped long-term government bonds in Europe, the UK, and the US amid renewed concerns over rising debt levels in major economies. This shift has raised market worries that governments worldwide may lose control over fiscal deficits, threatening higher borrowing costs and increased pressure on global financial stability.
Bank of Japan
The Bank of Japan meets on Thursday to review policy, with decisions due Friday.
Market pricing for a 25-basis-point rate hike at this meeting currently stands near 20%.
With expectations firmly leaning toward no change in rates for a fifth straight meeting, focus will be on Governor Kazuo Uedas comments regarding the policy outlook.
Yen Outlook
Analysts at MUFG wrote that the yens performance remains weak in the near term, weighed down by Japans political uncertainty after Ishibas resignation.
They added that the BOJ will need to signal the possibility of a rate hike soonperhaps as early as next monthto help reverse yen weakness.