By Rae Wee
SINGAPORE (Reuters) -The yen was on track for its best monthly start to the year since 2018 on Friday, helped by the view that the Bank of Japan (BOJ) is likely to keep raising rates this year while its global peers elsewhere look to ease policy.
The Mexican peso and Canadian dollar were on guard ahead of a looming Feb. 1 deadline which U.S. President Donald Trump has said would be the date he imposes 25% tariffs on imports from the two countries.
The loonie languished near a five-year low at C$1.4477 and was set for a weekly decline of close to 1%.
Mexico’s peso was recovering from its steep fall from the previous session and last stood at 20.6643 per dollar, though it remained on track for its worst weekly performance since October with a 1.85% fall.
“If (Trump) wants to talk tough, he’s got to act tough as well, and that starts with actually announcing something concrete tomorrow,” said Tony Sycamore, a market analyst at IG.
In Japan, the yen weakened on Friday and was last 0.34% lower at 154.84, after BOJ Governor Kazuo Ueda said the central bank must maintain loose monetary policy to ensure underyling inflation gradually accelerates toward its 2% target.
Still, the yen has climbed more than 0.7% for the week thus far and is set to gain 1.6% for the month, which would mark its best January performance in seven years.
The currency has drawn support from expectations of further BOJ rate hikes this year, with Deputy Governor Ryozo Himino saying on Thursday that the central bank will continue to raise interest rates if the economy and prices move in line with the bank’s forecasts.
Data on Friday showed core inflation in Tokyo hit 2.5% to mark the fastest annual pace in nearly a year.
“On the back of remarks from Deputy BOJ Governor Himino … (yen) bulls appear to be more confident about the resolve of policymakers to hike rates in 2025,” said Jane Foley, senior FX strategist at Rabobank, who sees dollar/yen trading at 145 by the year-end.
MORE EASING AHEAD
In the broader market, the dollar rose 0.1% to 108.22 against a basket of currencies but was on track for a slight monthly loss of 0.3%.
Data on Thursday showed U.S. economic growth slowed in the fourth quarter, though consumer spending increased at its fastest pace in nearly two years.
“Thursday’s GDP report confirmed that the economy, particularly the consumer, remains strong, and that there is no near-term risk of a recession. This gives the Federal Reserve the ability to be patient on rate cuts,” said Carol Schleif, chief market strategist at BMO Private Wealth.
The Fed had earlier this week kept rates steady and Chair Jerome Powell said there would be no rush to cut them again, though he also implied there was still scope for easing with rates being “meaningfully” above neutral.
Fed funds futures imply around 45 basis points worth of easing for the rest of this year.
The euro last bought $1.0388 and was headed for a weekly fall of 0.9%, after the European Central Bank (ECB) cut interest rates on Thursday and policymakers guided for a further reduction in March, as concerns over lacklustre economic growth supersede worries about persistent inflation.
Traders also see a similar outcome at next week’s Bank of England (BoE) policy meeting, where a 25-basis-point rate cut has been priced in.
Sterling last fetched $1.2420, and was on track to lose 0.7% for the month.
The British pound had faced immense pressure at the start of the month as investors heavily sold British government bonds and the currency in a move that reignited concerns about Britain’s finances.
Elsewhere, the Australian dollar rose 0.25% to $0.6224 but was set for a weekly decline of 1.4%, its steepest in over a month.
Australian consumer prices rose at the slowest pace in almost four years in the December quarter, data earlier this week showed, which led to markets ramping up bets for a rate cut from the Reserve Bank of Australia next month.
The New Zealand dollar advanced 0.15% to $0.5644, though was similarly on track to lose 1.3% for the week.
(Reporting by Rae Wee; Editing by Stephen Coates and Kim Coghill)
