SINGAPORE—The yen firmed on Thursday, returning towards a four-month peak against the dollar hit earlier in the week after the Bank of Japan’s surprise tweak to its bond yield control spurred bullish yen bets, while the dollar moved broadly lower.
The yen rose about 0.5 percent to 131.85 per dollar, after surging to a four-month high of 130.58 on Tuesday in the aftermath of the BOJ’s decision to allow the 10-year bond yield to move 50 basis points on either side of its 0 percent target, wider than the previous 25 basis point band.
The greenback, which rose 0.6 percent against the yen in the previous session, had failed to meaningfully recoup the 3.8 percent slump that followed Tuesday’s news.
“The BOJ opened the door, obviously, for further unwinding of its super-loose policies,” said Sean Callow, a senior currency strategist at Westpac.
“It’s a case of what’s the price action on the yen? Do people want to try to keep pounding at (dollar/yen), having absorbed the shock of Tuesday?”
Against the euro, the yen steadied at 140.34, while trading at 159.82 per pound. Both pairs were holding close to roughly three-month peaks hit on Tuesday.
The dollar softened, due to a pickup in risk sentiment after upbeat data showing U.S. consumer confidence rose to an eight-month high in December, as inflation retreated and the labor market remained strong.
The Aussie climbed 0.66 percent to $0.6752, while the kiwi gained 0.26 percent to $0.6311.
The euro was last 0.31 percent higher at $1.0638. Against a basket of currencies, the U.S. dollar index fell 0.3 percent to 103.92.
“Confidence returned to markets as Christmas came early in the form of an unexpected and broad-based surge in U.S. consumer confidence,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
Sterling rose 0.32 percent to $1.2123, partially reversing its 0.85 percent overnight fall.
British public borrowing unexpectedly jumped last month to its highest for any November on record, figures overnight showed, underscoring challenges for the economy.
“The borrowing figures are just a reminder of what a difficult position the UK is in, fiscally,” said Westpac’s Callow.
“In a world where risk sentiment is still very fragile, currencies whose countries have a twin deficit are at risk compared to others.”
In Asia, the Chinese offshore yuan was marginally higher at 6.9828 per dollar, although sentiment remains weighed down by the spread of COVID-19 across the country.
