US Dollar Gains Against Japanese Yen Ahead of Yellen Speech

The US dollar rose against the Japanese yen on bets the Federal Reserve will increase interest rates later in the year.

The dollar gained against the yen to 100.60 during the Asian trading session, bring its total gain this week to 0.3 percent.

“The dollar’s downside against the yen is edging up slightly as markets re-positioned against a shift in expectations toward U.S. tightening by the year-end,” Naoto Ono, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, wrote in a note. “I don’t think greenback buying will accelerate sharply ahead of Yellen’s speech, but more strong data could underpin the currency.”

However, the Bank of Japan is expected to ease further after the limited expansion failed to materialize. But Japanese businesses in a Reuters’ poll believed it will do little or nothing to aid the economy – so the Bank of Japan should not expand stimulus.

“It’s disappointing that the stimulus focuses on public works, and it lacks attention to promoting industry and technology that would lead to future growth,” said a manager at a precision-machinery maker.

While some investors are saying more than three years of aggressive monetary policy has resulted in interest rates distortion and the cornering of Japanese government bond (JGB) market.

Others like Michael Kretschmer, a chief investment officer at Pelargos Capital in the Hague, believed “the increased BOJ purchasing provides a very favorable demand environment for listed equities.”

“Nevertheless, in the long run we strongly doubt these type of monetary gimmicks aimed at price setting of risk assets can have a sustained positive impact on economic growth.”