By Chuck Mikolajczak
NEW YORK (Reuters) -The dollar advanced against the yen on Monday to resume its recent upward trend after Japan’s top central bank official signaled further monetary policy tightening was likely, but was vague on the timing of any such hike.
Bank of Japan Governor Kazuo Ueda reiterated the economy was progressing toward sustained wages-driven inflation and warned against keeping borrowing costs too low, leaving open the chance of another interest rate increase as early as next month, in his first comments on monetary policy since Donald Trump’s victory in the U.S. presidential election two weeks ago.
But Ueda offered no hints as whether a hike would come in December, as there were various “uncertainties” that needed to be examined.
“The Bank of Japan governor didn’t give any fresh signals,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Because of the chaos caused in July, the market is anticipating that BoJ would better prepare the market for the next move and the Bank of Japan governor didn’t do that today, and so I think the yen weakened.”
The BOJ had unexpectedly raised short-term interest rates at its July meeting.
Against the Japanese yen, the dollar strengthened 0.43% to 155. The greenback on Friday snapped a streak of four straight sessions of gains against the Japanese currency after Japanese Finance Minister Katsunobu Kato on Friday warned authorities would take action to combat excessive exchange-rate moves.
The market was pricing a roughly 54% chance of a quarter-point hike at its next policy meeting on Dec. 19, little changed from before the speech.
The dollar index, which measures the greenback against a basket of currencies including, fell 0.14% to 106.58, with the euro up 0.19% at $1.056. The index hit a more than one-year high last week of 107.07 and has been rising on expectations a Trump victory would lead to higher tariffs and potentially stoke inflation, which would slow the path of rate cuts from the Federal Reserve.
Two top European Central Bank policymakers signaled on Monday they were more worried about the damage that expected new U.S. trade tariffs would do to economic growth in the euro zone than any impact on inflation.
Recent comments from Fed officials, including Chair Jerome Powell, have pointed to the central bank being deliberate in its rate cut path.
In a light week for U.S. economic data, the National Association of Home Builders/Wells Fargo Housing Market Index rose to 46 this month, the highest since April, from 43 in October on optimism the recent elections would lead to regulatory changes that could spur more residential construction.
Trump’s election victory has caused the euro to slump as investors have priced in the potential for tariffs on the European Union and China, a key European trading partner. Investors and analysts have begun to talk of a possible fall to parity, where one euro equals a dollar.
Markets are waiting to hear who Trump will pick as Treasury secretary, with numerous media reports saying the president-elect has expanded the list of potential candidates to include a former Federal Reserve governor, Kevin Warsh, and billionaire executive Marc Rowan.
“My sense is looking at the appointments and even this discussion about the Treasury secretary and wanting to be sure that the Treasury secretary endorses tariffs,” said Chandler.
Sterling strengthened 0.06% to $1.2624 after dropping 2.4% last week, its biggest weekly percentage drop since early February 2023.
In cryptocurrencies, bitcoin fell 1.16% to $90,683.00.
This post is originally published on INVESTING.
