Written by Kevin Buckland
TOKYO (Reuters) – The yen hovered near a five-month low against the dollar on Friday, as the Federal Reserve's hawkish comments contradicted the Bank of Japan's cautious approach to further tightening monetary policy.
The yen was trading at 157.725 yen to the dollar by 0030 GMT, up 0.1 percent from Thursday, but still close to the lowest level in that session at 158.09 to the dollar, the weakest level for the yen since July 17.
A summary of views from the Bank of Japan's December policy meeting, released on Friday, showed some officials becoming more confident about raising interest rates in the near term, while others remained cautious amid uncertainty about the direction of wages and the policies of the incoming Donald Trump administration.
Tokyo's December inflation data, also released on Friday, was supportive of further rate hikes.
Bank of Japan Governor Kazuo Ueda said last week, after the central bank held interest rates steady, that it would take a “long time” to gauge the full outlook for wages and foreign economies, especially the United States.
By contrast, Federal Reserve Chair Jerome Powell said earlier this month that US central bank officials “will be cautious about further cuts” after an expected interest rate cut of a quarter of a percentage point.
Economists view Trump's looser regulation, tax cuts, higher tariffs, and tighter immigration as pro-growth and inflationary.
The dollar is on track to achieve gains of 5.4% this month against the yen, and 11.9% during the year.
“The uptrend is strong, but there is a feeling that the strong yen movement against the weak dollar we have seen so far is overdone and there is a risk of pullbacks.” Mizuho (NYSE:) securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.
“There is also the possibility of more stringent intervention warnings from Japanese officials.”
On December 20, both Japan's finance minister and chief foreign exchange diplomat said in separate media conferences that officials were concerned about “excessive” moves in the currency and were ready to take “appropriate action.”
The index, which measures the currency against the yen, euro, pound and three other major rivals, settled at 108.09 and was essentially in a holding pattern around that level all week. On a monthly basis, it increased by 2.2%.
Many traders take a holiday around Christmas and New Year.
The euro settled at $1.0421, down 1.5% so far in December. There was little change in the pound sterling at $1.25275 during the day, down 1.7% during the month.
Leading cryptocurrency Bitcoin settled at $95,660, down 1.2% this month, but after touching a record high of 108,379.28 on December 17. They are up about 125% so far this year.
