The yen rose 0.3% on Monday, recovering from steep losses last week as Japan’s top currency minister acknowledged that inflation was running stickier than expected.
But despite this trend, the Bank of Japan has given scant indication that it plans to tighten its ultra-loose policy in the near-term, and is widely expected to stand pat on interest rates and its yield curve control measures this Friday. The Japanese Government also said on Monday that inflation is likely to moderate further this year.
A dovish outlook from the BOJ puts more downward pressure on the yen, with a Fed rate hike this week set to further widen the gap between local and U.S. interest rates.
The rate hike is also expected to weigh on most other Asian currencies, as the gap between risky and low-risk debt narrows.
The Taiwan dollar fell 0.1%, while the South Korean won rose 0.3%. The Indian rupee was flat, while the Australian dollar inched up on the prospect of more stimulus measures in China.
