The yen rose on Tuesday as investors reacted to comments from a senior Japanese politician, adding pressure on the Bank of Japan to continue raising interest rates to strengthen the currency. The dollar and euro stabilized with the lack of economic data, while the Australian and New Zealand dollars suffered after a surprise interest rate cut in China.
Senior ruling party official Toshimitsu Motegi said overnight that the Bank of Japan should more clearly signal its intention to normalize monetary policy, including steadily raising interest rates. The Bank of Japan is set to decide on interest rates on July 31.
Lee Hardman, a currency analyst at Mitsubishi UFJ, said, “The yen drew support from additional comments from Japanese politicians overnight,” adding that his remarks indicate “growing concern” among politicians about the Bank of Japan’s policy. This follows last week’s calls from Minister Taro Kono, who urged the Bank of Japan to raise interest rates to provide more support for the yen.
The yen found some support following recent intervention by Tokyo to support the currency, and as traders await the Bank of Japan’s decision. However, most economists polled by Reuters expect the Bank of Japan to keep interest rates unchanged at the meeting.
Trading was relatively subdued during the week with little economic data until the release of U.S. personal consumption expenditure inflation figures for June on Friday.
