Forex - Yen holds weaker as BoJ stands pat, Greece heads to the wire

Investing.com - The Japanese yen held flat to weaker in early Asia Friday after the central bank kept policy steady as expected with attention now turning to Greece as it races to reach a deal within a deadline estimated at days.

USD/JPY changed hands at 122.98, up 0.03%, while AUD/USD traded at 0.7784, down 0.18%. EUR/USD was quoted at 1.1374, up 0.11%.

The Bank of Japan held policy steady as expected on Friday in an 8 to 1 vote that saw Takahide Kiuchi again propose cutting the pace of government bond buying by nearly half.

The BoJ is now buying government bonds at a pace of ¥80 trillion, with Kiuchi suggesting that be dropped to ¥45 trillion.

The board did conclude that the economy continues to recover moderately and that private consumption has been resilient, while exports have improved.

At the same time, the BoJ said it would revise its communication efforts by releasing forecasts and risk views from each member and an opinion summary within one week of the meeting.

BoJ Governor Haruhiko Kuroda holds a news conference at 1530 (0630 GMT) to discuss the board's decision.

Still in Japan, May retail sales data are due at 1430 (0530 GMT) while BoJ Deputy Governor Hiroshi Nakasoi is due to deliver a brief speech at a credit union meeting in Tokyo at 1536 (0636 GMT).

Greece's finance minister Yanis Varoufakis said Thursday that the standoff between Athens and its creditors was "dangerously close" to an accident and that he had made a new proposal of a "deficit brake" to help reach an agreement with creditors.

"We are dangerously close to a state of mind that accepts an accident, and I urged my colleagues not to fall prey to this state of mind," he said. "We can forge an agreement. Our government is standing by with ideas."

Varoufakis made the comments after a meeting of the Eurogroup in Luxembourg, which ended without an agreement on financing for Greece, meaning there are now only days remaining before the expiration of the country's second bailout and the deadline for repaying the International Monetary Fund €1.5 billion.

He said that he had made an "innovative" proposal at the meeting here to introduce an independent fiscal council to monitor the budget that would be empowered with a "hard deficit brake" to automatically implement fiscal controls in Greece if projections show a high probability of the budget going into primary deficit.

International Monetary Fund head Christine Lagarde warned that Greece will not be given a grace period if it fails to make a loan repayment of €1.5 billion on June 30.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.04% to 94.17

Overnight, the dollar pared back losses against the other major currencies on Thursday after the release of mixed U.S. economic reports; one day after the Federal Reserve said the economy was still not strong enough to withstand higher interest rates.

Data on Thursday showed that U.S. consumer prices increased at the fastest rate in more than two years in May, climbing 0.4% after a 0.1% gain in April. But economists’ had forecast an increase of 0.5% and inflation was still well below the Fed’s 2% target.

Underlying inflation ticked up 0.1%, slowing from 0.3% in April.

The weaker-than-expected inflation data overshadowed another report showing that initial jobless claims fell by 12,000 to 267,000 last week, pointing to ongoing strengthening in the labor market.

A separate report showed that factory activity in the U.S. mid-Atlantic region expanded at the fastest rate in six months in June.

The Philly Fed manufacturing index rose to 15.2 this month from May's 6.7.

The dollar weakened across the board after Fed Chair Janet Yellen said Wednesday that the central bank wanted to see “more decisive evidence” of sustained growth before raising rates, but acknowledged that the economy has “expanded moderately” after a weak first quarter.

The Fed lowered both its U.S. growth forecast and its interest-rate projections, prompting investors to push back expectations on the timing of an initial rate hike.

Sentiment on the single currency remained fragile as a deadlock between Greece and its international lenders continued ahead of the approaching deadline for Greece’s repayments to the International Monetary Fund at the end of the month.

A default by Greece could lead to the country’s exit from the euro zone.