Yen Rises As BoJ Governor Ueda Signals Rate Hike

(RTTNews) - The Japanese yen strengthened against other major currencies in the Asian session on Wednesday, after Bank of Japan Governor Kazuo Ueda signaled raising interest rates at next week's meeting.

Speaking at an event hosted by the Regional Banks Association of Japan, the BoJ's Ueda said that they "will raise rates and adjust degree of monetary support if improvement in economy and price conditions continues."

"Timing of adjusting monetary policy is up to future economic, price, and financial conditions," Ueda said.

Traders seek clues about the possibility of a rate hike in the coming January 23-24 policy meeting.

Tuesday, BoJ Deputy Governor Ryozo Himino said the bank will hike the interest rate if its outlook continues to be realized.

"The developments in prices and inflation expectation, including the economic mechanisms behind them, seem to have been largely on the path," Himino told local business leaders in Kanagawa.

In economic news, data from the Bank of Japan showed that the M2 money stock in Japan was up 3.2 percent on year in December, coming in at 1,257.7 trillion yen. That exceeded expectations for 1.3 percent, which would have been unchanged from the previous three months.

The M3 money stock rose an annual 0.8 percent to 1,609.5 trillion yen, while M1 was up 1.3 percent to 1,096.5 trillion yen.

Investors are cautious and reluctant to make more significant moves ahead of a more closely watched report on U.S. consumer price inflation later in the day that could influence the U.S. Fed's rate trajectory.

Meanwhile, the smaller than expected monthly increase by U.S. producer prices helped ease recent concerns about the outlook for inflation and interest rates. The faster annual growth kept buying interest somewhat subdued.

In the Asian trading today, the yen rose to 162.04 against the euro, 191.86 against the pound and 157.20 against the U.S. dollar, from yesterday's closing quotes of 162.81, 192.95 and 157.96, respectively. If the yen extends its uptrend, it is likely to find resistance around 158.00 against the euro, 187.00 against the pound and 152.00 against the greenback.

Against the Swiss franc, the yen edged up to 172.33 from an early 5-day low of 173.23. On the upside, 168.00 is seen as the next resistance level for the yen.

Against Australia, the New Zealand and the Canadian dollars, the yen edged up to 97.31, 88.04 and 109.46 from Tuesday's closing quotes of 97.81, 88.52 and 110.47, respectively. The next resistance levels for the yen are seen around 168.00 against the franc, 95.00 against the aussie, 85.00 against the kiwi and 106.00 against the loonie.

Looking ahead, Eurostat is slated to issue euro area industrial production figures for November at 5:00 am ET in the European session. Economists forecast production to grow 0.3 percent on month after remaining flat in the previous month.

In the New York session, U.S. MBA mortgage approvals data, U.S. CPI data for December, U.S. NY Empire State manufacturing index for January, Canada manufacturing and wholesale sales reports for November, U.S. EIA crude oil data and U.S. Fed Beige Book report are slated for release.