Yen gains on BOJ hike; yuan, Antipodean peers get Trump boost

By Rae Wee

SINGAPORE (Reuters) -The yen rose after the Bank of Japan (BOJ) hiked rates on Friday and revised up its inflation forecasts, while the Australian and New Zealand dollars surged after U.S. President Donald Trump suggested a potentially softer stance on tariffs against China.

The BOJ raised rates by 25 basis points at the conclusion of its two-day policy meeting, in a move that had been well telegraphed by policymakers prior to the outcome.

The yen swung between losses and gains in choppy trade shortly after the decision, but later turned decisively higher. It was last 0.4% stronger at 155.43 per dollar.

"Dollar/yen went both ways likely in reaction to the non-unanimous vote, but it subsequently eased. The upward revision to CPI forecasts also exudes a sense of confidence the policymakers have with regard to inflation and the economy meeting expectations," said Christopher Wong, a currency strategist at OCBC.

Earlier on Friday, data showed Japan's core consumer prices rose 3.0% in December from a year earlier to mark the fastest annual pace in 16 months.

Investors' focus now turns to BOJ Governor Kazuo Ueda's post-meeting briefing at 0630 GMT for clues on the pace and timing of future rate hikes. Markets are leaning towards one more by year-end.

Elsewhere, the Australian and New Zealand dollars were riding high from Trump's interview with Fox News aired on Thursday evening, where he said he would rather not have to use tariffs over China and that he thought he could reach a trade deal with the world's second-largest economy.

The Aussie jumped more than 0.6% to reach a five-week top of $0.6324, while the kiwi similarly scaled a five-week peak of $0.57105.

The two Antipodean currencies are often used as liquid proxies for the Chinese yuan.

"It's still early days, although it looks like he prefers to negotiate with China first and perhaps come to a deal, rather than to use tariffs," said Sim Moh Siong, a currency strategist at Bank of Singapore.

"If he goes down the route of holding back on tariffs but instead coming to a deal with China, then you could see more relief coming through in terms of the Asian currencies as well as the Aussie and the kiwi."

The Chinese yuan similarly got a lift on the back of Trump's remarks, with the onshore unit rising to its strongest level in six weeks at 7.2381 per dollar.

Its offshore counterpart also peaked at its highest since Dec. 11 at 7.2404 per dollar.

TRUMP COMMENTS HIT DOLLAR

Trump's latest comments on China tariffs pushed the dollar broadly lower, keeping it on track for its worst weekly fall in two months.

Investors have sold the dollar in the wake of Trump's inauguration after his widely expected tariff announcements did not immediately materialise, unlike what he had threatened during his campaign.

The greenback extended losses to hit a one-month trough of 107.70 against a basket of currencies, and was set to lose more than 1.5% for the week.

"What you're seeing right now in terms of the dollar pullback is a reflection that there's been some tariff risk premium that's been priced in the dollar, and now the market is pricing (that) out," said Bank of Singapore's Sim.

The euro, meanwhile, rose 0.36% to $1.0453 and was headed for a roughly 1.8% weekly gain, its best since November 2023.

Sterling advanced 0.5% to $1.2412 and was similarly poised for a rise of 1.5% for the week, snapping three straight weeks of losses.

Also adding to headwinds for the dollar were comments from Trump demanding that the Federal Reserve cut interest rates, arguing he understands monetary policy better than those charged with setting it.

"The Trump comments ... are a reminder that we're just going to have this constant source of volatility coming from off-the-cuff comments, and of course, it does on paper challenge a little bit of that Fed independence," said Rodrigo Catril, senior FX strategist at National Australia Bank.

Trump's remarks come just days before the Fed's first policy meeting to be held during his administration, with very broad expectations officials will leave rates unchanged.

In cryptocurrencies, bitcoin was last 1.8% higher at $104,981.55, while ether gained 4.57% to $3,397.27.

Trump on Thursday ordered the creation of a cryptocurrency working group tasked with proposing new digital asset regulations and exploring the creation of a national cryptocurrency stockpile, making good on his promise to quickly overhaul U.S. crypto policy.

(Reporting by Rae Wee; Editing by Jacqueline Wong, Shri Navaratnam and Kim Coghill)