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Yen perched near 7-mth high as investors wait for policy shift at BOJ

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By Tom Westbrook


SINGAPORE (Reuters) – The drifted above multi-month lows on Tuesday, while the was perched near seven-month highs as held their breath for a potential policy shift at the .


The euro, which reached a nine-month high on Monday at $1.0874, was last loitering around $1.0825.


The hit a top of 127.22 per during Asia hours on Monday, before steadying around 128.69 on Tuesday. Options trade shows a market braced for sharp moves when the (BOJ) concludes a two-day meeting on Wednesday, with overnight implied volatility surging to a six-year high.


Speculation is building about a change or end to Japan’s yield curve control policy, given that the market has pushed 10-year yields above a ceiling set by the BOJ of 0.5% and the amount of bond buying to defend it is becoming staggering.


A newspaper report last week has also stoked expectation for a change, so traders are on the lookout for a sharp reaction even if the BOJ makes no move. The rose 3% against the last week, and one-week implied volatility for dollar/yen is at its highest since March 2020.


“The market has run pretty hard with this story and is looking for a follow up,” said Tony Sycamore, an analyst at brokerage IG Markets.


He sees three main possibilities: no policy change, a tweak similar to a move in December to widen the 10-year yield target band. and the total abandonment of yield curve control, with the latter likely to drive the most extreme market response.


“The yen would explode higher, Japanese government bond yields would explode higher and global yields would go higher,” he said, with the latter driven by an expectation Japanese would sell overseas bonds as the yen rises.


Elsewhere, the U.S. dollar index has bounced from a seven-month low of 101.77 made a day ago and held at 102.30. Sterling touched its highest since mid-December at $1.2288 before easing back to $1.2195 in Asia trade.


There was not a great deal of currency market reaction to far stronger-than-expected Chinese growth data.


At 2.9%, fourth-quarter year-on-year growth was way stronger than the 1.8% consensus forecast, helped by retail sales falling a lot less than feared in December. Economists said that bodes well for a recovery, but markets – which have already priced in big rebound – were less sure how to take it.


The yuan last traded about 0.5% weaker at 6.7696 per dollar.


“It’s a bit of a rear-view mirror for a market that’s already made up its mind that reopening will sustain the recovery,” said Bank of Singapore strategist Moh Siong Sim.


The Australian dollar, which hit a five-month high just above $0.70 on Monday and wobbled around $0.6976. The New Zealand dollar held at $0.6402. [AUD/]


Traders are looking ahead to British labour data, U.S. earnings and Canadian inflation figures later in the day.


Bitcoin, which has been on a tear in recent days, steadied above $20,000 and last bought $21,154.


========================================================


Currency bid prices at 0538 GMT


Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid


Previous Change


Session


Euro/Dollar


$1.0825 $1.0824 +0.01% +0.00% +1.0833 +1.0807


 


Dollar/Yen


128.6750 128.6000 +0.05% +0.00% +129.1050 +128.3150


 


Euro/Yen


139.30 139.07 +0.17% +0.00% +139.5700 +138.8500


 


Dollar/Swiss


0.9253 0.9260 -0.06% +0.00% +0.9275 +0.9252


 


Sterling/Dollar


1.2189 1.2196 -0.05% +0.00% +1.2212 +1.2173


 


Dollar/Canadian


1.3408 1.3410 -0.07% +0.00% +1.3421 +1.3395


 


Aussie/Dollar


0.6959 0.6956 +0.06% +0.00% +0.6978 +0.6951


 


NZ


Dollar/Dollar 0.6393 0.6382 +0.17% +0.00% +0.6407 +0.6375


 


 


All spots


Tokyo spots


Europe spots


Volatilities


Tokyo Forex market info from BOJ


 


(Reporting by Tom Westbrook; Editing by Bradley Perrett and Christian Schmollinger)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


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