Monday, 11 December 2023

Yen flounders, dollar drifts ahead of bonanza


The dollar traded sideways on Tuesday as investors braced for a slew of central bank meetings this week, while the yen languished near a 10-month low as Japan’s ultra-loose monetary policy once again came under fire, Reuters reported.

Currency moves were largely subdued in Asia trade as the Federal Reserve’s impending rate decision on Wednesday stayed top of mind, with the spotlight in Asia also on the Bank of Japan’s (BOJ) policy decision due Friday.

The yen fell 0.1% to 147.76 per dollar and was kept pinned near last week’s 10-month low of 147.95 per dollar.

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Expectations are for the BOJ to keep interest rates ultra-low on Friday and reassure markets that monetary stimulus will stay, at least for now, even as Governor Kazuo Ueda stoked speculation of an imminent move away from ultra-loose policy.

Elsewhere, the Aussie slipped 0.09% to $0.64315, shrugging off minutes of the Reserve Bank of Australia’s (RBA) September meeting that showed it considered raising rates by 25 basis points, before eventually deciding to hold the benchmark cash rate unchanged.

The U.S. dollar edged marginally higher, straying not too far from a six-month peak hit against its major peers last week,

The dollar index gained 0.11% to 105.20, while the New Zealand dollar edged down 0.03% to $0.59155.

Money markets expect the Fed to keep rates on hold at its upcoming meeting, according to the CME FedWatch tool, though focus will be on the central bank’s forward guidance.

The euro, meanwhile gave up some of its gains from the previous session and was last 0.12% lower at $1.0678.

It had risen alongside euro zone government bond yields on Monday, following hawkish comments from European Central Bank (ECB) policymakers that further rate increases were on the cards.

In other currencies, sterling edged 0.04% higher to $1.2390, ahead of an interest rate decision from the Bank of England (BoE) also due this week.

While the BoE is expected to deliver another rate hike on Thursday, the increase could mark the central bank’s last in its current tightening cycle as a cooling economy begins to worry policymakers.