(Bloomberg) -- The yen rose on Thursday as comments from Bank of Japan Deputy Governor Ryozo Himino reaffirmed views that the central bank will keep raising rates this year.
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The Japanese currency was trading up 0.4% at 154.59 against the dollar at 4:55 p.m. It gained as much as 0.6% to 154.29 earlier as JGB yields rose on expectations of a potentially hawkish steer from Himino and a report the BOJ was taking steps to shrink its balance sheet.
Himino echoed Governor Kazuo Ueda’s phrasing from last week that the central bank will raise rates if its outlook is realized. The deputy governor also added that real rates being negative for a long time is not normal, and that gradually moving to a world with positive yields is ideal.
“Himino was somewhat hawkish in his comments,” said Juntaro Morimoto, a senior currency analyst at Sony Financial Group. “It’s difficult to make any predictions on the next move because it’s not expected until the middle of 2025 at the earliest.”
Even after the BOJ raised rates last week, the interest rate differentials between the US and Japan remain wide, which will continue to weigh on the yen. Swaps traders are pricing in a 66% chance of a BOJ rate hike by July, and have fully priced a move by October.
Some parts of Himino’s speech “give me the impression he may be thinking the BOJ’s terminal rate is higher than 1%,” said Teppei Ino, Tokyo head of global markets research at MUFG Bank Ltd. That is “an upside risk to the yen.”
--With assistance from Hidenori Yamanaka and Masaki Kondo.
(Updates with comments from Himino and fresh prices)
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