REUTERS, New York

The Japanese yen was heading for a monthly loss against the US dollar on Friday after the Bank of Japan disappointed traders hoping for a more hawkish stance on future rate hikes, while the Federal Reserve dampened expectations for a December rate cut.

The yen clawed back some losses after Japanese Finance Minister Satsuki Katayama said the government has been monitoring foreign exchange movements with a high sense of urgency as the yen weakens.

Core inflation in Tokyo also accelerated in October and stayed above the central bank’s 2 percent target, data showed on Friday.

But disappointment after BOJ Governor Kazuo Ueda adopted a less hawkish tone on future rate hikes than hoped held the yen in check. The Japanese central bank kept rates on hold at 0.5 percent.

Noel Dixon, global macro strategist at State Street Global Markets, said he remains constructive on the yen, adding that “the BOJ ultimately is still going to have to normalize policy at least to 1 percent.”

“From a multi-year perspective, wages are definitely higher than they’ve been … and the fiscal spending is only going to exacerbate that prospect,” Dixon said.

Japan’s newly elected leader, Sanae Takaichi, is expected to pursue more fiscally expansive policies to boost economic growth.

The yen was last flat on the day and heading for its worst month since July, with the dollar up 4.2 percent against the currency this month.

The dollar index rose 0.35 percent to 99.82 and is on track for a 2 percent monthly gain, its best since July.