Yen Strengthens as BOJ Rate Hike Expectations Rise

The Japanese yen is on track for its strongest monthly start since 2018, buoyed by the anticipation of continued interest rate increases by the Bank of Japan (BOJ). This contrasts with the easing stance adopted by other global central banks.

Uncertainty Surrounds Mexico and Canada

The Mexican peso and Canadian dollar remain on edge ahead of the February 1 deadline set by U.S. President Donald Trump for potentially imposing 25% tariffs on imports from the two countries. The Canadian dollar hovers near a five-year low, while the peso shows signs of recovery after a steep decline.

Further BOJ Rate Hikes Expected

In Japan, the yen has strengthened to 154.19 per dollar, continuing a weekly gain of over 1%. This is in anticipation of further rate increases from the BOJ, as indicated by Deputy Governor Ryozo Himino. Data showing core inflation in Tokyo hitting a near-year high of 2.5% reinforces this expectation.

Broader Market Outlook

The U.S. dollar has risen slightly against a currency basket but remains poised for a monthly decline of 0.3%. Economic data indicates continued consumer strength, providing room for the Federal Reserve to remain patient on rate cuts. However, Fed funds futures anticipate around 45 basis points of easing later this year.

European Central Bank and Bank of England to Ease

The euro has fallen against the dollar after the European Central Bank's rate cut and guidance for further easing in March. Similarly, traders expect a 25-basis-point rate cut at the Bank of England's meeting next week.

Other Currency News

The Australian dollar remains near $0.6209, heading for a 1.7% weekly decline due to expectations of a rate cut by the Reserve Bank of Australia. The New Zealand dollar has also weakened against the dollar, with a weekly loss of 1.3% projected.