Dollar stabilizes, yen climbs ahead of BOJ meeting

Dollar stabilizes, yen climbs ahead of BOJ meeting
Dollar stabilizes, yen climbs ahead of BOJ meeting
© Reuters.

By Peter Nurse

Investing.com – The U.S. dollar stabilized in early European trade Monday, trading just above a seven-month low on rising expectations that the Federal Reserve will slow the pace of its interest-rate hikes, while the Japanese yen gained ahead of a Bank of Japan meeting.

At 03:00 ET (08:00 GMT), the , which tracks the greenback against a basket of six other currencies, edged higher to 101.987, just above levels not seen since early June last year, although volumes are limited with the U.S. on holiday. 

The dollar is down well over 1% so far this year, with last week’s U.S. showing inflation fell for the first time in more than 2-1/2 years in December.

This seemingly confirmed earlier impressions that inflation is on the retreat, which has led to expectations that the U.S. is nearing the end of its rate-hike cycle, and that rates will not go as high as previously feared. 

The main U.S. economic release this week will be Wednesday’s U.S. . They posted their largest decline in 11 months in November and a similar drop in December would add to expectations that the Fed will cool its aggressive rate hikes to avoid more damage to the economy.

rose 0.1% to 128.00, just above its seven-month floor reached earlier Monday, with traders firmly focused on the ’s policy-setting meeting later in the week.

Expectations are growing that the BOJ would make further changes to its yield control policy when it announces its monetary policy decision on Wednesday, following its surprise move last month to widen the band around its 10-year bond yield target.

Prices are climbing in Japan, with inflation in the capital city Tokyo hitting 4% for the first time since 1982, and thus pressure is mounting on the central bank to shift away from its ultra-easy monetary policy.

“USD/JPY has come a long way very fast, but some of the longer-term skews in the FX options market point to a structural shift in the market’s view in USD/JPY,” said analysts at ING, in a note. “We suspect few will want to stand in the way of the USD/JPY downside. 126.50 looks like the clear near-term target for USD/JPY.”

Elsewhere, traded flat at 1.0827, after earlier hitting a fresh nine-month top of 1.0874, while edged lower to 1.2224, just off a new one-month peak.

fell 0.1% to 0.6968, after earlier breaching the key 0.7000 level for the first time since August, while rose 0.1% to 6.7090, with the yuan retreating slightly the central bank also injected more liquidity into markets to shore up economic growth, as the country grapples with its worst yet COVID-19 outbreak.

Leave a Reply

Your email address will not be published. Required fields are marked *

AdonFinance
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance