THE U.S. dollar may not necessarily rise versus the yen if the U.S. Federal Reserve raises interest rates as traders may have already priced the possibility of a rate hike into the market, the Bank of Japan (BOJ) governor said.

    It is desirable for currencies to move in a stable manner and reflect economic fundamentals, BOJ Governor Haruhiko Kuroda told Japanese lawmakers yesterday as the yen hovered near a 13-year low versus the U.S. dollar.

    Finance ministers and central bankers from Group of Seven countries did not discuss the strong dollar or currencies at a summit in Germany last month, Kuroda also said.

    Some Japanese policymakers have expressed concern about the yen’s decline for fear this could raise import prices too quickly or become a source of trade friction.

    The yen has fallen largely as a result of the BOJ’s massive quantitative easing aimed at breaking the economy free from a long phase of debilitating deflation.

    “If U.S. rate hikes are fully priced in, then there is no reason for the dollar to rise further versus the yen,” Kuroda said.

    “You cannot say that a rate hike from the Fed will necessarily cause the dollar to rise versus the yen.”

    The dollar was steady at 124.38 yen, but remained below its 13-year peak of 125.86 yen scaled Friday after the unexpectedly strong U.S. job growth reinforced expectations for the Federal Reserve to start raising rates this year.

    The BOJ is still in the middle of its quantitative easing program, and some economists have said the divergence in monetary policy between Japan and the United States will push the dollar higher versus the yen.

    However, Kuroda tried to downplay this scenario in response to questions in parliament.

    “It’s hard to conclude decisively that the dollar will continue to strengthen further just because the Fed has done tapering and eyeing raising interest rates,” Kuroda said.(SD-Agencies)