Yen Wobbles as BOJ Holds Steady

The Japanese yen is facing a monthly loss against the U.S. dollar due to the Bank of Japan's cautious approach on rate hikes and a firm stance by the Federal Reserve. Despite core inflation in Tokyo remaining above target, the BOJ has maintained its 0.5% rate, with experts predicting necessary future adjustments.

The Japanese yen confronted a monthly decline against the U.S. dollar on Friday after the Bank of Japan opted for a conservative position on rate hikes, countering speculative hopes for a bolder approach. Meanwhile, the Federal Reserve dampened December rate cut expectations.

Japanese Finance Minister Satsuki Katayama acknowledged the urgent monitoring of foreign exchange movements amid Tokyo's core inflation surge beyond the central bank's 2% target. Analysts, such as Noel Dixon from State Street Global Markets, foresee necessary rate normalization to at least 1% over time.

In global trading, the U.S. dollar index saw a 2% monthly increase, buoyed by economic optimism and inflation concerns. Meanwhile, the Federal Reserve's policy divide and reluctance for further rate cuts this year have added layers of uncertainty to dollar movements.

(With inputs from agencies.)