The dollar soared above ¥98 in Tokyo trading Thursday on a clearer timetable offered by U.S. Federal Reserve Chairman Ben Bernanke for scaling back the Fed’s quantitative monetary easing.
At 5 p.m., the dollar was quoted at ¥98.10-10, up from ¥95.00-08 at the same time Wednesday. The euro was at $1.3223-3225, down from $1.3391-3392, and at ¥129.71-75, up from ¥127.25-27.
The greenback traded around ¥96.50 in the morning and extended its upswing in the afternoon.
The U.S. central bank decided to keep its current policy unchanged at a two-day Federal Open Market Committee meeting through Wednesday, while noting that the committee “sees the downside risks to the outlook for the economy and the labor market as having diminished” since autumn.
At a news conference following the policy-setting meeting, Bernanke suggested that the Fed could begin to slow the pace of asset purchases later this year and end the quantitative easing policy in mid-2014 if the economy improves in line with its projection.
“Bernanke showed an unexpectedly hawkish view, and the currency market welcomed and directly reacted to it,” an official at a foreign exchange brokerage said.
The Fed’s exit strategy is now clearer, while the Bank of Japan has only recently begun its aggressive monetary easing campaign.
“The difference between the U.S. and Japanese monetary policies will fuel expectations for a widening gap between interest rates in the two countries, increasing the possibility of the return of a dollar-strengthening, yen-weakening trend,” an official at a major Japanese bank said.