Yen Rallies On Speculation Of Further BoJ Policy Tweak

A media report that the Bank of Japan will study the consequences of ultra-loose policy at the week's monetary policy meeting has strengthened the Japanese yen in the Asian session on Thursday.

The Yomiuri newspaper reported that the policy board of the BoJ will examine the negative effects of its yield curve control policy and disturbances in the bond market during the policy meeting next week.

The yen gained almost 0.6 percent against the dollar and Japanese government bonds climbed in anticipation of a monetary policy tilt by the BoJ.

The yen was further supported by expectations that the latest CPI readings from the U.S. later today would reveal a decisive drop in inflation in the month of December.

A slowdown in inflation will raise hopes that the Fed will continue to downsize rate hikes to 25 basis points at the next meeting to be held on February 1.

The yen advanced to 3-day highs of 131.36 against the greenback and 159.78 against the pound, off its early lows of 132.48 and 160.96, respectively. The yen is poised to face resistance around 117.00 against the greenback and 155.00 against the pound.

The yen firmed to a 2-day high of 141.44 against the euro and an 8-day high of 140.86 against the franc, reversing from its early lows of 142.53 and 142.27, respectively. The next possible resistance for the yen is seen around 136.00 against the euro and 80.00 against the franc.

The yen appreciated to a 1-week high of 97.83 against the loonie and 6-day highs of 90.67 against the aussie and 83.47 against the kiwi, following its prior lows of 98.68, 91.52 and 84.36, respectively. The currency may possibly challenge resistance around 92.00 against the loonie, 87.00 against the aussie and 80.00 against the kiwi.

Looking ahead, U.S. weekly jobless claims for the week ended January 7 and CPI and monthly budget statement for December are scheduled for release in the New York session.