Yen Under Pressure Amid BOJ Decisions

By Brigid Riley

TOKYO (Reuters) – The yen remained under pressure on Thursday as the Bank of Japan (BOJ) kept ultra-low interest rates steady, while the U.S. dollar consolidated ahead of jobs data later this week and the U.S. presidential election next week.

The Japanese currency has taken a beating this month as the dollar and U.S. Treasury yields have hovered around their highest since July. The yen has fallen more than 6% in October and is on track for its biggest monthly loss against the dollar since November 2016.

Japan's political shake-up has contributed to the yen's struggles, amplifying uncertainty about the nation's fiscal and monetary policy outlook. The BOJ maintained interest rates on Thursday and kept its forecast that inflation will linger near its 2% target in coming years, signaling readiness to continue rolling back its massive monetary stimulus.

Analysts are divided on the possibility of additional interest rate hikes by year-end, putting emphasis on BOJ Governor Kazuo Ueda's post-meeting briefing for hints about the pace and timing of further increases.

The yen was down 0.02% at 153.34 versus the dollar, remaining largely unchanged post-BOJ's decision, and was not far off a three-month low of 153.885 hit on Monday.

"Any strengthening of the yen at present would likely result from a general weakening of the U.S. dollar if interest rates begin to align," said Sean Teo, a sales trader at Saxo. The recent decline in the yen may make traders cautious as excessive weakening could attract the attention of Japanese authorities.

Markets received further economic data from China ahead of the BOJ's decision, with the National Statistics Bureau's manufacturing PMI showing activity in October expanded for the first time in six months. The official PMI rose to 50.1 in October from 49.8 in September, just above the 50 mark separating growth from contraction, beating a median forecast of 49.9 in a Reuters poll. The offshore yuan remained steady, last trading at 7.1309.

Jobs Report and Presidential Election in Focus

U.S. nonfarm payrolls will conclude the week on Friday before the presidential election on Tuesday. Some investors are betting on Republican candidate Donald Trump, although he remains neck and neck with Vice President Kamala Harris in various polls.

The dollar index, which gauges the currency against six major rivals, rose 0.08% to 104.17 after softening the day before. It reached its highest since July 30 at 104.63 on Tuesday. "Data overnight reaffirmed the underlying strength of the U.S. economy, largely supporting what's already been factored into the price instead of providing a fresh catalyst for a renewed push higher," Westpac analysts noted.

U.S. private payroll growth surged in October, data from Wednesday showed, overcoming fears stemming from hurricanes and strikes. Additionally, separate data indicated the U.S. economy grew at an annualized rate of 2.8% in the third quarter, slightly below the expected 3% by economists.

The euro edged down 0.06% to $1.0849 after rising to $1.0871 on Wednesday. Regional inflation data and Eurozone GDP came in stronger than expected, leading traders to reduce bets on a major rate cut from the European Central Bank in December.

Sterling was at $1.29445, down 0.13% for the day. Meanwhile, the Australian dollar fell 0.02% to $0.6573 after September's domestic retail sales numbers missed estimates, inching up by just 0.1%, while the New Zealand dollar ticked up 0.04% to $0.5974.