(Bloomberg) -- The yen posted its longest losing streak versus the dollar since June as traders bet that the Bank of Japan will refrain from raising interest rates next week.
The Japanese currency extended losses on Friday, falling 0.7% to 153.67 per dollar, the weakest level since Nov. 26. The yen is down a fifth day.
Bloomberg reported earlier this week that BOJ policymakers see little cost in waiting until January or later to raise rates because there’s a limited risk that inflation might overshoot. They are open to a hike next week depending on economic data and market developments, the report said.
Money markets pared bets on a BOJ rate increase this month after the report, and now assign 16% probability to that outcome. A week ago, the chance of a hike was 64%. The BOJ decision comes a day after the Federal Reserve is widely seen cutting its benchmark by a quarter point, though the longer-term outlook is murkier.
“The BOJ hike seems unlikely next week,” said Takafumi Onodera, who’s in charge of sales and trading at Mitsubishi UFJ Trust & Banking Corp. in New York. “If the Fed cuts rates with a hint at a pause next year, then the yen can weaken to 156 per US dollar.”
The BOJ’s quarterly Tankan report released on Friday showed confidence among Japan’s large firms remains upbeat, but the data didn’t move rates expectations.
Hedge funds recently added to their bets against the yen, according to Commodity Futures Trading Commission data for the week ended Dec. 10.
“We think risks are tilted to a weaker yen,” said Adarsh Sinha, a FX and rates strategist at Bank of America. “The BOJ is in a wait-and-see mode as they assess future US economic policy.”
--With assistance from Alice Atkins.
(Updates prices throughout, adds positioning data)
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