By Hiroyuki Kachi
The yen remained volatile against its rivals in Asian trade on Friday, coinciding with gyrations in Japanese government bond yields amid speculation about the Bank of Japan's accommodative policy steps.
The U.S. dollar gained ground against the yen to change hands at Y113.02 around 0450 GMT after dropping to Y112.50 earlier in the session. That was above the Y112.81 level in late Thursday in New York.
The euro was at Y121.60 from Y121.41. The yen was also weaker against rivals such as the British pound.
The dollar lacked direction early in the Asian session, as many were sitting on the sidelines ahead of U.S. jobs data later on Friday. But a catalyst camefrom the BOJ's move to arrest rising JGB yields.
Having witnessed a spike in the JGB yields recently, "investors are keeping their eyes on what action the BOJ will take," said Toshihiko Sakai, senior manager at forex and financial products trading division at Mitsubishi UFJ Trust and Banking.
Growing speculation about the BOJ's yield-curve-control policy is forming "an undercurrent" of increasing JGB yields, said Tokai Tokyo Securities chief strategist Kazuhiko Sano. President Donald Trump's comments suggesting Japan has been devaluing the yen is raising speculation the BOJ may have to weaken its accommodative stance.
At Tokyo's mid-morning, the BOJ offered to buy Y450 billion worth of bonds with five to 10 years of remaining maturities, up from Y410 billion it said it was planning to buy via its operations in February.
But the step seemed to have disappointed investors who were expecting more drastic steps to keep a lid on rising yields, sending the 10-year JGB yields to fresh one-year high of 0.150% and pulling down the dollar to an intraday low of Y112.50.
The benchmark yield passed the level that market watchers considered the BOJ's effective ceiling of around 0.1%.
But the central bank later Friday offered to buy, at a fixed rate, some JGBs maturing in five to 10 years. By buying at a fixed rate, the central bank is theoretically offering to buy an unlimited volume of the bonds--or whatever it takes to get the yield to its targeted level.
The action helped pull down the 10-year yield and the yen during early afternoon Asian trade, pushing up the dollar to as high as Y113.24.
A lack of fresh trading cues ahead of the key U.S. data allowed investors to turn the spotlight on the BOJ action, said Mr. Sakai at Mitsubishi UFJ Trust.
The WSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was up 0.06% at 90.56.
In other currency trade, the euro was flat at $1.0758 in midday Asia trade from $1.0759.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31
USD/JPY Japan 113.03-04 112.80-81 +0.20 113.22 112.51 -3.39
EUR/USD Euro 1.0757-60 1.0758-61 -0.01 1.0773 1.0746 +2.27
GBP/USD U.K. 1.2519-21 1.2527-29 -0.06 1.2535 1.2510 +1.42
USD/CHF Switzerland 0.9927-31 0.9926-30 +0.01 0.9940 0.9918 -2.55
USD/CAD Canada 1.3025-30 1.3024-29 +0.01 1.3041 1.3022 -3.08
AUD/USD Australia 0.7651-55 0.7656-60 -0.07 0.7664 0.7639 +6.26
NZD/USD New Zealand 0.7274-80 0.7286-92 -0.16 0.7296 0.7264 +5.08
EUR/JPY Japan 121.58-62 121.34-38 +0.20 122.75121.09 -1.22
Source: Tullett Prebon
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
(END) Dow Jones Newswires
February 03, 2017 00:49 ET (05:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.