LONDON/TAIPEI – The yen rebounded from its lows on Thursday as investors assessed Nvidia’s earnings for insights into AI demand, while assessing the latest signals from the Bank of Japan for clues on the interest rate outlook.
Japan’s currency rose 0.2% against the dollar to 155.99 yen, ending a two-day losing streak after Bank of Japan Governor Kazuo Ueda maintained his outlook for short-term interest rate hikes.
A few days after it was reported that Prime Minister Sanae Takaichi expressed disapproval of further monetary tightening in a meeting with the central bank’s governor, Governor Ueda said in an interview with the Yomiuri Shimbun that the central bank would decide on the direction of interest rates based on data at its meetings in March and April.
“It’s kind of a push and pull, and the Bank of Japan is walking a very fine line,” said David Chao, global market strategist for Asia Pacific at Invesco.
“However, we still believe the central bank will raise interest rates twice this year, and the yen is likely to be one of the best-performing currencies,” he added.
The Japanese government on Wednesday appointed two academics seen as strong proponents of economic stimulus to the central bank’s board.
Analysts at BofA Securities said, “Leaving the yen weak carries political risks, and foreign exchange intervention alone will not be enough.The possibility of policy inaction remains low.”
Meanwhile, hawkish board member Hajime Takada said in a speech that the central bank needs to focus on the risk of inflation overshoot when guiding monetary policy, and called for a gradual rise in interest rates.
Modest reaction to NVIDIA
Despite Nvidia’s strong quarterly results, US S&P 500 < ESc1> and futures tied to the tech-heavy Nasdaq each fell 0.1%.
AI heavyweights posted strong revenue growth, but failed to trigger an immediate shift to risk-on sentiment.
The US dollar index, which measures the US dollar’s strength against a basket of six currencies, stabilized at 97.678.
Financial markets continue to almost unanimously believe that U.S. interest rates will not rise at the next Federal Reserve meeting.
Federal funds futures are little changed from a day earlier, with a 98% implied probability that the U.S. central bank will keep interest rates unchanged at its next two-day meeting on March 18, according to CME Group’s FedWatch tool.
The yield on the 10-year US Treasury note rose 0.2 basis points to 4.0518%.
There also remained uncertainty over how US President Donald Trump would react to the February 20 Supreme Court ruling invalidating emergency tariffs.
U.S. Trade Representative Jamieson Greer said Wednesday that U.S. tariffs on some countries will increase from a new 10% to more than 15%, but he did not mention specific trading partners or provide further details.
Geopolitics also remained in the market’s spotlight, as the United States and Iran prepare to renegotiate their long-standing nuclear dispute in Geneva.
“Geopolitical developments pose notable risks more broadly, particularly as tensions in the Middle East continue, the prospects for a peace deal between Russia and Ukraine remain uncertain, and U.S.-China relations remain fragile,” Goldman economists said.
The euro was almost unchanged at $1.18. European Central Bank President Lagarde said policymakers continue to expect inflation to stabilize at the 2% target in the short term.
The British pound fell 0.3% to $1.35. Domestic political risk remains a key factor, with traders keeping an eye on the Manchester local election, which is widely seen as a key test for Prime Minister Keir Starmer and Labor.
In China, the yuan strengthened against the dollar in offshore trading, rising 0.3% to 6.8344, the highest level in nearly three years, despite the central bank’s intention to curb its rapid appreciation.
