TOKYO, Jan 15 The yen edged up from a 13-month low against the dollar on Monday after dat

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TOKYO, Jan 15 (Reuters) The yen edged up from a 13-month low against the dollar on Monday after data showed Japanese machinery orders beat forecasts, possibly paving the way for the Bank of Japan to raise interest rates this week.

Core machinery orders rose 3.8 percent in November from a month earlier, above market expectations for a 3.4 percent gain and showing that steady capital spending is underpinning economic growth.

Investors believe the BOJ is leaning towards raising overnight rates to 0.5 percent, which would be the highest since 1995, despite opposition from senior government officials who have warned the central bank to be cautious on policy.

Ministers worry that raising rates too quickly could undermine the economy's recovery from a decade of stagnation.

One senior ruling party official, Hidenao Nakagawa, said over the weekend that the government should consider asking the BOJ to postpone any proposed vote to raise rates at a two-day policy meeting that ends on Thursday, Kyodo news agency reported.

But even a rate rise would not erode the huge yield advantage of other major currencies, and the BOJ is seen taking a while longer before another round of monetary tightening.

''Even if the BOJ hikes, it won't be a strong catalyst for yen strength,'' said Masafumi Yamamoto, a currency strategist at Nikko Citigroup in Tokyo.

''The decision will be very interesting: whether the BOJ hikes or not, whether the decision is unanimous or not, and whether the government asks for a postponement. The risks to the yen will be to the downside,'' Yamamoto said.

Japanese newspapers reported at the weekend that the BOJ was likely to lift rates this week, viewing the economy as strong enough to withstand a rate rise and believing consumer spending will stay on a rising trend.

The dollar fell to 120.15 yen after the data from near 120.30 yen in New York trade late last week, pulling further away from the 13-month peak of 120.74 yen struck on Friday.

The euro slipped to 155.25 yen from 155.45 yen.

The single European currency edged down to $1.2920 but was up from a 1-1/2-month low of $1.2865 hit on Friday.

Sterling extended gains after the Bank of England surprised with a rate rise to 5.25 percent last week, climbing to an eight-year high of 236.00 yen before falling back to 235.25 yen Reuters AD VP0748

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