The Yen Was a Little Stiff

On Thursday, the yen gained a little strength and moved closer to a four-month high against the dollar it had reached earlier this week after an unanticipated change to the Bank of Japan’s bond yield controls fueled bullish yen bets.

A 0.3% increase brought the yen to 132.08 per dollar. It increased to a four-month high of 130.58 on Tuesday after the BOJ decided to expand the previous 25 basis point band to allow the ten-year bond yield to move 50 basis points.

The yen held steady at 140.24 against the euro while trading at 159.10 against the pound. About both currencies, the yen was nearly at its highest since late September.

The dollar was stable ahead of important U.S. data releases, such as the third quarter GDP final reading and weekly jobless claims data, which should provide additional insight into the underlying strength of the American economy following strong consumer confidence data on Wednesday.

The dollar index, which compares the value of the U.S. dollar to a basket of six other currencies, including the yen, earlier dropped as much as 0.5% to reach 103.75, the lowest point in a week. The last significant change was at 104.20.

Luis de Guindos, vice president of the ECB, said they might raise interest rates at the current pace for a “period ” to contain inflation. This caused the euro to rise by 0.1% to $1.0617. After falling 0.85% on Wednesday, the pound fell 0.3% to $1.2063 as data showed that the British economy is close to entering a recession.

There are no obvious reasons you would necessarily want to be long of sterling as the U.K. outlook remains bleak. The consumer confidence numbers indicated that the economy is holding up despite higher interest rates.