Bank of Japan expected to raise interest rates Friday

Story link: Bank of Japan expected to raise interest rates Friday

The Japanese yen strengthened on Monday as expectations grew that the Bank of Japan will allow interest rates to rise above zero for the first time in five years when it meets later in the week. Also helping the yen to rise were bank lending that was up to a ten-year high in June and higher than expected machinery orders.

While the yen stayed more or less steady against the US dollar at ¥113.97, it added 0.4 percent versus both sterling and the Australian dollar, to ¥209.84 and ¥85.26 respectively. The Japanese currency was up 0.5 percent to ¥145.31 in relation to the euro.

The dollar was also stronger Monday, but once again analysts were at a loss to explain the demand for the greenback. Some theorized that reports that the budget deficit might end the year lower than had been expected are the explanation, while others thought that traders were paying more attention to earnings growth and unemployment rate levels rather than to the disappointing jobs creation data announced last week.

The US currency was up 0.4 percent to $1.8417 in relation to sterling, while it added 0.5 percent to $1.2749 versus the euro, 0.6 percent to Sfr1.2296 against the Swiss franc, and 0.9 percent to C$1.1237 in relation to the Canadian dollar. It is expected by some analysts that the Bank of Canada will raise interest rates to 4.5 percent when it meets on Tuesday.