USD/JPY Gains Quarter of a Yen Following Comments of Fed’s Plosser on Rate Hikes

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Following Philadelphia Fed President Charles Plosser’s recent suggestion that the central bank should raise rates before unemployment falls to “acceptable” levels, the greenback strengthened moderately against the euro before slipping back. However, a more pronounced appreciation has been visible in USD/JPY: the greenback has slowly but steadily gained a net 0.25 yen to recently hit a new session high of 91.35. The move sees the U.S. dollar beginning to take back the losses it incurred versus Japan's currency on Jan. 12. Earlier in the day Mizuho currency experts had suggested that the Fed wouldn’t be raising rates in the near future, and this, they argued, made the yen more attractive to investors than the greenback. Obviously, Plosser’s comments imply an earlier-than-expected rate hike, although it should be emphasized that the central banker has no vote on the FOMC to implement his argument until 2011.