Japanese Yen Lower On Fed-BOJ Policy Divergence

The Japanese yen weakened against its major counterparts in the European session on Friday, as hawkish comments from Federal Reserve officials raised expectations that monetary policy divergence between the U.S. central bank and its Japanese counterpart will widen again.

In an interview with the Wall Street Journal, St. Louis Fed President Bullard said that he supported another 75 basis-point rate hike next month and wanted rates to get to 3.75% to 4.00% by end of the year.

In addition, San Francisco Fed President Mary Daly said that it would be appropriate to raise rates by either 50 basis-point or a 75 basis-point in September to bring inflation down.

Better-than-expected inflation data from Japan failed to offer any support to the Japanese yen.

Data from the Ministry of Internal Affairs and Communications showed that Japan inflation continued to remain above the 2 percent target on higher fuel prices and weaker yen.

Excluding fresh food, core inflation increased to 2.4 percent from 2.2 percent in the previous month. The rate matched economists' expectations.

The yen declined to more than a 3-week low of 136.76 against the greenback and a fresh 4-week low of 142.86 against the franc, off its early highs of 135.71 and 141.88, respectively. The next possible support for the yen is seen around 139.00 against the greenback and 143.7 against the franc.

The yen weakened to a 9-day low of 137.96 against the euro and a fresh 3-week low of 105.46 against the loonie, down from its prior highs of 136.94 and 104.81, respectively. The currency is likely to find support around 140.00 against the euro and 107.00 against the loonie.

The yen fell to a 4-day low of 94.49 against the aussie and a 2-day low of 85.17 against the kiwi, after gaining to 93.83 and 84.76, respectively in previous deals. The yen is seen finding support around 97.00 against the aussie and 86.5 against the kiwi.

The yen edged down to 162.84 against the pound, from a high of 161.95 seen at 7:45 pm ET. If the currency slides further, 164.00 is possibly seen as its next support level.

Looking ahead, Canada retail sales for June are due in the New York session.