LONDON: The dollar climbed versus the safe-haven yen on Tuesday as improving investor risk appetite worked against the Japanese currency, which was also under pressure from the prospect of the Bank of Japan eventually easing monetary policy.
The dollar fetched 120.42 yen JPY= after gaining 0.5 percent overnight to touch a 1-week high of 120.55.
Investor risk appetite improved after last Friday’s weak U.S. nonfarm payrolls report was seen cutting the chances of the Federal Reserve hiking interest rates this year.
Even as the Fed could be forced to hold off tightening this year, the policy divergence theme that has supported the greenback remained in place.
Following a two-day meeting the BOJ makes a policy decision on Wednesday and the market will be watching for any hints of further easing.
Inflation has undershot central bank forecasts in Japan and there has been speculation that the BOJ could downgrade its growth and economic forecasts this week, leaving the door open for more monetary easing later in October.
Other central banks in focus include the Reserve Bank of Australia (RBA), which announces its monetary policy decision later on Tuesday.
“There should be little tension around the RBA meeting with all forecasters expecting rates to remain on hold, though some investors might punt on a notable change in wording of the statement,” wrote Sean Callow, senior strategist at Westpac in Sydney.
The Australian dollar AUD=D4 was steady at $0.7082 following an overnight advance to a 2-week peak of $0.7112. A rise in commodity prices has so far shored up the Aussie.
