©Reuters.
Investing.com– The dollar strengthened sharply against the dollar on Thursday, surpassing key levels after a Bank of Japan insider called for a review of the bank’s ultra-accommodative policy, including exiting yield curve control and negative interest rates.
The yen jumped 0.5% to 149.87 against the dollar, recovering quickly from the 150 level it had held against the greenback for nearly a month.
BOJ board member Hajime Takata said on Thursday that the central bank must consider an exit from its ultra-expansionary policy, signaling growing prospects of inflation reaching the BOJ’s 2% annual target. He also said that higher wages will increase family income and make the goal more achievable.
Takata called on the bank to abandon yield curve control measures and also raise interest rates. As part of its massive stimulus program, the BOJ currently allows benchmark bond yields to move in a range of -1% to 1% around a 0% base, and holds at -0.1% for almost a decade.
Takata’s comments raised bets that the BOJ was close to ending this policy, which bodes well for the yen. Warmer-than-expected January inflation data released earlier this week also saw markets price in the possibility of an end to the BOJ’s stimulus policies by April.
Takata’s comments offered some relief to the yen, which was languishing at three-month lows on the prospect of higher U.S. interest rates for a longer period. This trade has driven flows into the euro and hit the yen over the past two years, at one point bringing the currency to its weakest level in 30 years.
But the weakness of the Japanese economy still casts some doubt on the BOJ’s plans. The economy unexpectedly entered recession in the fourth quarter of 2023, while January data painted a poor picture.