Yen hovers near 5-month low as BOJ's cautious stance weighs

The yen hovered near a five-month low to the dollar on Friday as the U.S. Federal Reserve's hawkish messaging contrasted with the Bank of Japan's cautious approach to further policy tightening.

The yen traded at 157.725 per dollar as of 0030 GMT, edging up 0.1% from Thursday, but still close to the low of that session at 158.09 per dollar, the yen's weakest level since July 17.

A summary of opinions from the BOJ's December policy meeting, released Friday, showed some officials becoming more confident about a near-term rate increase, while others remained wary amid uncertainties over the trend for wages and the policies of the incoming Donald Trump administration.

Inflation data for Tokyo in December, also released Friday, was supportive of further rate hikes.

BOJ Governor Kazuo Ueda said last week, after the central bank held rates steady, that it would take "considerable time" to fully gauge the outlooks for wages and overseas economies, particularly the United States.

By contrast, Fed Chair Jerome Powell said earlier this month that U.S. central bank officials "are going to be cautious about further cuts" following an as-expected quarter-point rate reduction.

Trump's mooted looser regulation, tax cuts, tariff hikes and tighter immigration are seen as both pro-growth and inflationary by economists.

The dollar is on track for a 5.4% gain this month against the yen, and an 11.9% advance for the year.

"The upward trend is strong, but there's a feeling that the strong dollar-weak yen movement we've seen to now is overdone and there's the risk of pullbacks," Mizuho Securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client note.

"There's also the possibility of firmer intervention warnings from Japanese officials."

On Dec. 20, both Japan's finance minister and its top FX diplomat said at separate media briefings that officials are alarmed by "excessive" currency moves and stand ready to take "appropriate action".

The U.S. dollar index, which measures the currency against the yen, euro, Sterling and three other major rivals, was steady at 108.09 and has been essentially in a holding pattern around that level all week. For the month, it is up 2.2%.

Many traders are on holiday around Christmas and the New Year.

The euro was flat at $1.0421, down 1.5% so far in December. Sterling was little changed at $1.25275 on the day, and down 1.7% for the month.

Leading cryptocurrency bitcoin was steady at $95,660, slipping 1.2% this month, but after touching a record high of 108,379.28 on Dec. 17. It has surged about 125% so far this year.