TOKYO- The yen edged higher on Monday, reversing early declines, with sentiment still fragile following the Japanese currency’s best weekly rally since late April after a US tech-led stock rout ignited demand for safe haven assets.
Traders are now looking ahead to policy decisions by the Bank of Japan and the Federal Reserve, both on Wednesday, for further direction. Rising speculation for a BOJ interest rate hike this week has helped buoy the yen, with the Fed also widely expected to set the stage for a September rate cut.
Investor were also wary of further geopolitical volatility, with Israel weighing a response to a deadly rocket strike in the Israeli-occupied Golan Heights which Israel and the United States blamed on Lebanese armed group Hezbollah.
The dollar was last down 0.14 percent at 153.51 yen after slipping as much as 0.49 percent to the cusp of 153 at one point.
It had started the day by gaining as much as 0.36 percent , as the global equity market rebound from Friday extended into Monday in Asia, with Japan’s Nikkei stock average up more than 2 percent .
The dollar dipped as low as 151.945 on Thursday for the first time since May 3, and ended the week down 2.4 percent .
“The rally seemed to stall” in dollar-yen following the Israel news, though the cause was not clear, said Shinichiro Kadota, a currency and rates strategist at Barclays in Tokyo.
“Sentiment remains fragile.”
Ultimately, “US equities are still the key,” Kadota added. “Market moves have been led by US equities, and we need to see if things stabilize there.”
The US earnings calendar this week is populated with heavyweights including Amazon Apple Meta and Microsoft
Currency traders also need to contend with not just the BOJ and Fed on Wednesday, but the Bank of England a day later.
Speculation has grown that the BOJ will raise interest rates on Wednesday at the same time as significantly reducing its monthly bond purchases. It had promised to outline its quantitative tightening (QT) plans at this meeting during its previous gathering last month.
