Yen stages a partial recovery as BOJ hikes, intervention risks weighed

The yen recovered some ground on Monday following a steep drop ‍at the end of last week as markets weighed the timing of more interest rate hikes in ⁠Japan and the possibility of intervention in thin end-of-year trading.

Bank of Japan policymakers debated the need to continue raising rates, a summary of opinions at their policy meeting in December showed on Monday. The euro was ‌supported after U.S. ‌President Donald Trump signalled optimism in talks to reach a peace deal to end the war in Ukraine.

Japan has a ‌free hand in dealing with excessive moves in the yen, Finance Minister Satsuki Katayama said last week. Those intervention warnings have helped keep a lid on dollar-yen positions, but pessimism about Japan's currency is showing up in other foreign exchange crosses, said Bart Wakabayashi, Tokyo branch manager at State Street.


"I think a long position in yen is quite painful," Wakabayashi said. "We're seeing some expression of yen shorts against these currencies, particularly Aussie-yen."

"The ‌market is ‍still trying to figure out what kind of role the yen plays ‍now in terms of being a safe haven," he added.

The ‌yen strengthened 0.3% against the greenback to 156.13 per dollar after a 0.5% slide on Friday.

The dollar index, which measures the greenback against a basket of currencies, fell 0.1% to 97.96. The euro advanced 0.1% to $1.1780.

The BOJ raised its policy rate to a 30-year high of 0.75% from 0.5% at its December meeting. The summary of opinions released on Monday showed many board members saw the need for further increases to the ‍rate, which remained significantly negative in inflation-adjusted terms.

President Trump said on Sunday that he and Ukrainian President Volodymyr Zelenskiy were "getting a lot closer, maybe very ‍close" to an ⁠agreement to end the ⁠war in Ukraine, though both leaders acknowledged that some of the thorniest details remain unresolved.

The two leaders spoke at a joint press conference late Sunday afternoon after meeting at Trump's Mar-a-Lago resort in Florida. Trump said it will be clear "in a few weeks" whether negotiations to end the war will succeed.

In a thin economic calendar this week, the main focus will be minutes released on Tuesday from the Federal Open Market Committee's December meeting.

The Australian dollar was little changed at $0.6714. New Zealand's kiwi was steady at $0.5830.

In cryptocurrencies, bitcoin gained 0.6% to $88,083.23, while ether climbed 1.1% to $2,967.20.