Friday July 14, 2006 - 01:00:29 GMT
Share This Story
Reuters - www.reuters.com
FOREX-Yen shackled ahead of BOJ rate decision
TOKYO, July 14 (Reuters) - The yen sat tight against the dollar and the euro on Friday as investors took to the sidelines with the Bank of Japan apparently set to raise interest rates for the first time in six years.
At the end its two-day meeting later in the day, the central bank is widely forecast to boost the overnight call rate to 0.25 percent, ending an era of zero rates aimed at fighting off deflation.
"People see a 25-basis-point rate hike as a done deal. What could move the market is comments from the BOJ after the meeting," said a trader at a major Japanese trust bank.
"If the BOJ confirms that it isn't in a hurry to further boost rates, the impact from comments will be limited."
For clues about the pace of future tightening, investors will tune in to remarks by BOJ Governor Toshihiko Fukui at his post-meeting news conference at 0630 GMT, though he is expected to stress that the central bank will lift rates only gradually.
In early Asian trade, the dollar was little changed at 115.45 yen .
The euro was flat at $1.2690 , well below a one-month high of $1.2865 touched last week.
The euro steadied at 146.45 yen , about 1 yen below the record high of 147.42 yen hit last week
The yen rose this week to a one-month high of 113.45 yen on trading platform EBS as traders raised bets for a quarter percentage point rise.
Analysts and traders said a rate increase by the BOJ may not prompt more yen buying as the market has already factored in such a move, and given that the yield gap between the yen and other major currencies would remain wide.
The Federal Reserve lifted its funds rate for the 17th straight time to 5.25 percent last month and some expect it to raise again in August.
The European Central Bank is also expected to boost its key rate next month to 3 percent.
After the market digests the BOJ's decision, it is likely to shift attention back to the dollar's yield advantage, traders said.
For clues about the outlook for U.S. rates, investors will look to U.S. retail sales data for June due at 1230 GMT and the University of Michigan's consumer sentiment index for July slated to land at 1345 GMT.
Â© Reuters 2006. All Rights Reserved.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."