Forex – Yen gains as BoJ minutes suggest tight JGB supply

Yen gains after BoJYen gains after BoJ

The yen gained in Asia on Wednesday as April minutes from the Bank of Japan suggested the pace of asset purchases for Japan Government Bonds could fluctuate on supply.
USD/JPY changed hands at 111.38, down 0.07%, while AUD/USD traded at 0.7568, down 0.17%. GBP/USD fell 0.06% to 1.2622.

“Unless the bank decelerated further the pace of its JGB purchases at this point, the sustainability and stability of the purchases would not be secured through 2018,” the minutes quoted one board member as saying. That person also thought supply-demand conditions in the JGB market would tend to tighten further, partly because the amount of JGB issuance by the government was to be reduced.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was flat at 97.40.

Overnight, the dollar traded close to session highs against a basket of global currencies, as sentiment on the greenback remained positive in the wake of upbeat comments from the Federal Reserve while a slump in the pound supported further upside momentum.

A dent in sterling pushed the dollar to session highs, after Bank of England Governor Mark Carney stifled rate hike expectations, saying that now is not the time to raise rates, pointing to “anaemic” wage growth and mixed signals on consumer spending and business investment.

The slump in sterling added to recent positive sentiment on the greenback, on the back of comments from the New York Federal President William Dudley on Monday.
Dudley stoked rate hike expectations, warning that halting U.S. interest rate increases could be dangerous for the economy, insisting continued progress in the jobs market will push wages higher, reviving the recent slowdown in inflation.

Dudley’s comments echoed that of other senior central bankers who worry that delays in monetary policy tightening could result in a situation in which the Fed could be forced to raise rate rapidly.
Meanwhile, Chicago Fed President Charles Evans said on Monday it may be worthwhile for the U.S. central bank to wait until year-end to decide whether to raise interest rates again