The yen hit a one-month high against the dollar on Thursday on growing speculation that the Bank of Japan could end negative interest rates this month, while bets that U.S. rate cuts could come by mid-year weighed on the greenback.
The Japanese currency rallied more than 0.5% to a high of 148.40 per dollar, and made gains against the euro and sterling.
The euro was last 0.53% lower at 161.99 yen, while the British pound fell 0.43% to 189.23 yen.
BOJ board member Junko Nakagawa said on Thursday Japan's economy was moving steadily towards sustainably achieving the central bank's 2% inflation target.
Her comments come one day after Jiji news agency reported that at least one of the central bank's nine board members is likely to say that removing negative interest rates would be reasonable at this month's policy meeting.
The yen has weakened for the most part of the past two years owing to stark interest rate differentials. Major central banks aggressively hiked interest rates to tame inflation, while the BOJ remained a lone outlier with its ultra-easy monetary policy stance.
A move by the BOJ away from negative interest rates would come at a time where bets for rate cuts elsewhere - particularly from the Federal Reserve - continue to build, which would give some much needed support to the battered Japanese currency.
In the broader market, the U.S. dollar was on the back foot, as traders zeroed in on the idea that U.S. interest rates were likely to fall this year even after some upside surprises on inflation.
Fed Chair Jerome Powell said on Wednesday rate cuts will "likely be appropriate" later this year "if the economy evolves broadly as expected" and once officials gain more confidence in inflation's steady deceleration.
Those remarks, coupled with data released the same day that pointed to an easing of labour market conditions, sent U.S. Treasury yields skidding, which in turn pushed the greenback broadly lower.
The euro and sterling held near one-month highs struck in the previous session and last bought $1.0900 and $1.27395 respectively.
Futures pricing currently point to a roughly 70% chance that the Fed could begin easing rates by its June policy meeting, according to the CME FedWatch tool, with about 87 basis points worth of cuts priced in for the year.
All of that left the greenback pinned near a one-month low against a basket of currencies. The dollar index edged 0.07% lower to 103.26.
Elsewhere, the Australian dollar rose to a two-week high of $0.65885, while the New Zealand dollar similarly hit a one-week top of $0.6149.
Source : Reuters
