Yen plumbs 34-year low as intervention risks grow

The yen was pinned on the weaker side of 155 per dollar on Thursday as the Bank of Japan (BOJ) kicks off its two-day rate-setting meeting, leaving traders nervous as to whether Tokyo will intervene while policy deliberations are still underway.

Having traded in a tight range over the past few days, a buoyant dollar finally broke above the 155 yen level for the first time since 1990 in the previous session.

The greenback again notched a 34-year high of 155.74 yen on Thursday USDJPY.

Intense speculation that the Japanese government will intervene to shore up the yen had hampered the dollar's ascent towards the psychologically key level, seen by some market participants as a line in the sand that would prompt Tokyo to take action.

As the BOJ meets to discuss monetary policy, expectations are for the central bank to keep its short-term interest rate target unchanged at the conclusion of the meeting on Friday, following last month's landmark exit from negative rates.

"We expect the BOJ meeting to deliver a marginally hawkish hold outcome," said Carl Ang, fixed income research analyst at MFS Investment Management.

"As for policy signalling, April seems a little early to pivot away from the BOJ's March communication that accommodative financial conditions will continue for the time being.

Continued expectations of gradual policy tightening and a low terminal policy rate make it difficult for the yen to appreciate significantly, even if at historically depressed levels."

BOJ Governor Kazuo Ueda said this week the central bank will raise interest rates again if trend inflation accelerates toward its 2% target as expected.

Still, the dollar was nursing some losses versus other currencies after a slight tumble earlier in the week following upbeat business activity data in the euro zone and the UK sent the euro and sterling higher.

The euro EURUSD last gained 0.1% to $1.07085, edging slightly away from an over one-week high hit on Wednesday, while sterling GBPUSD was little changed at $1.24675.

The dollar dipped slightly to 105.77 against a basket of currencies DXY, though it pulled away from a nearly two-week low hit in the previous session.

Trading in Asia was thin with Australian markets closed for a holiday.

The Aussie AUDUSD tacked on 0.14% to $0.65065, buoyed by receding bets of rate cuts from the Reserve Bank of Australia (RBA) this year after the country's consumer price inflation slowed less than expected in the first quarter. (0#RBAWATCH)

"Inflation is moderating but it has some way to go before the RBA can be confident it will return to the 2–3% target range on the desired timetable," said Justin Smirk, senior economist at Westpac.

"As such, we expect the RBA to remain on hold in May and have pushed back the date of our first rate cut to November, from September previously."

The New Zealand dollar NZDUSD gained 0.03% to $0.5937.