Investing.com — Asian currencies traded mixed on Friday, with the yen holding relatively steady after the Bank of Japan kept interest rates unchanged but signalled further hikes, while the dollar weakened as renewed selling in AI stocks triggered demand for safe-haven bonds.
Investors also assessed the outlook for global interest rates after the Federal Reserve, European Central Bank, Reserve Bank of New Zealand and Bank of Japan all held rates unchanged this week.
The BOJ’s 8-1 decision to keep its policy rate at 1.25%, alongside an upward revision to its inflation outlook and renewed readiness to raise rates further, reinforced expectations of another increase as soon as December.
The U.S. dollar index fell 0.2% to 101.81, although it remained on track for a 0.3% gain in October, marking a second consecutive monthly advance. The USD/JPY pair slipped 0.1% to 157.60, while the EUR/USD pair rose 0.04% to 1.1186 and the GBP/USD pair gained 0.2% to 1.3398.
The yen remained on course for a roughly 0.2% monthly decline against the dollar, while the euro was heading for a 1.2% loss in October.
Yen firms as BOJ holds rates but signals further hikes
The Bank of Japan kept its policy rate unchanged at 1.25% on Friday in an 8-1 vote, but raised its inflation forecast and reiterated its readiness to increase borrowing costs further as price pressures build. Board member Hajime Takata dissented, calling instead for a 25-basis-point hike to 1.50%.
The decision leaves markets looking towards December, with traders pricing in around an 80% chance of another rate increase and follows rate holds by the Federal Reserve, ECB and RBNZ this week.
Those central banks are taking time to assess persistent inflation and tighter financial conditions, but elevated energy prices and the lack of progress toward resolving the Middle East conflict mean further tightening has not been ruled out.
The Bank of England and Reserve Bank of Australia will be in focus next week.
The yen had weakened slightly to around 157.81 per dollar in earlier trading and was on course for a monthly decline of about 0.2%, the pair was little changed over the week.
Aussie tracks inflation and producer costs ahead of RBA meeting
The Australian dollar was little changed at $0.7033, although it has gained around 1.2% this month and was 0.2% higher than Monday’s close. Investors were weighing fresh producer-price data against September inflation figures and comments from RBA Governor Michele Bullock ahead of next week’s policy meeting.
