Currency Rollercoaster

The Japanese yen dipped significantly after comments by BOJ Governor Kazuo Ueda hinted at a shift from the bank's negative interest rate policy. Meanwhile, the US dollar rebounded from its largest daily drop since July 13, while the British pound faced setbacks due to mixed labor market data.

Over the weekend, Ueda suggested the BOJ might consider ending its negative rates policy by year-end, sparking the yen's biggest daily gain against the dollar since July 12. Currently at 146.71 yen per dollar, down 0.1% from its peak of 145.91.

Adam Cole, Chief Currency Strategist at RBC Capital Markets, stated, "Ueda's comments were more balanced than initially perceived. Japan still lacks sustainable 2% inflation, so these remarks won't alter the outlook significantly."

The yen's underperformance against the dollar is attributed to growing interest rate gaps between Japan and the US, with the Federal Reserve pursuing aggressive rate hikes while the BOJ remains dovish.

Hiroshige Seko, a senior official from Japan's ruling party, interpreted Ueda's remarks as signaling continued monetary easing.

In other markets, the US dollar rebounded, causing the euro to dip by 0.3% to $1.0718. The British pound weakened due to mixed labor market data, though wage growth outpaced inflation.

US Inflation Data in Focus

Market attention shifted to US inflation data for August, with potential implications for the Federal Reserve's rate decisions. The US dollar index rose 0.2% to 104.76.

Adam Cole noted, "The US data release is the week's main event because the Federal Reserve closely monitors incoming inflation data." A larger risk lies in a potential dollar decline if the data meets expectations.

Meanwhile, the Australian dollar inched up to $0.6436, while the New Zealand dollar fell slightly to $0.5915.

Both onshore and offshore yuan maintained one-week highs, supported by a six-month daily gain against the dollar. China's central bank tightened scrutiny of domestic firms' bulk dollar purchases.

In cryptocurrencies, Bitcoin rose over 2% to $25,849, rebounding from a three-month low below $25,000.