2024-01-23 00:56:54
The yen remained near its lowest level in two months on Tuesday, on the eve of a highly anticipated policy decision by the Bank of Japan (BOJ), which is expected to remain faithful to its ultra-free monetary policy.
Elsewhere, the US dollar remained broadly stable while its New Zealand counterpart slipped to a two-month low of $0.60625, pressured by the greenback’s strength and China’s gloomy economic outlook.
The yen reached 148.13 per dollar, not far from last week’s low of 148.80, as it continues to be penalized by wide interest rate differentials between Japan and the United States. United.
The BOJ concludes its two-day monetary policy meeting on Tuesday, although any hopes of a gradual phasing out of its negative interest rate policy this month were dashed following the devastating Bank Day earthquake. ‘an and pessimistic comments from BOJ Governor Kazuo Ueda.
“I don’t think it’s live,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia, referring to Tuesday’s policy decision.
“I think the earthquake in Japan has really changed the market’s expectations regarding the Bank of Japan’s policy normalization in the near future.
“So I don’t think today will bring any surprises in terms of interest rates and (yield curve control) policy.
Attention will also be focused on the central bank’s economic projections in its quarterly outlook report.
“Markets will closely watch whether the BOJ revises the 2025 CPI forecast upwards to meet the 2% target or keeps it at 1.7%,” Kong said.
“This figure will indicate whether the BOJ considers the rise in inflation to be sustainable or not.
The European Central Bank (ECB) also meets this week, where its deposit rate is expected to remain stable at 4.00%.
ECB policymakers, including President Christine Lagarde, have bucked market expectations for early rate cuts.
This has helped the Euro somewhat, with the single currency moving sideways in recent sessions. The euro lost 0.06% to $1.0879 in early Asian trade.
PROSPECTS FOR RELAXATION
Across the broader market, the kiwi was last at $0.6074, struggling to move away from its two-month low.
“The (New Zealand dollar) has emerged as the weakest currency in the G10 FX of late, which may be partly explained by negative sentiment towards China, but also by recent neo data. companies that have fallen short,” said Chris Weston, head of research at Pepperstone.
The fourth quarter inflation rate is due on Wednesday, which will provide insight into when the Reserve Bank of New Zealand (RBNZ) may begin easing interest rates.
“A downside surprise could bring forward expectations of a first 25 basis point rate cut from May to the April RBNZ meeting,” Mr Weston said.
Against the dollar, the pound sterling slipped 0.03% to $1.27075, while the Australian dollar gained 0.06% to $0.6574.
The dollar index stabilized at 103.36, not far from a more than one-month high of 103.69 it reached last week, as traders cut their expectations by one rate cut by the Federal Reserve in March.
US Treasury bond yields remained supported, with the two-year yield at 4.3847%, up more than 25 basis points from its January low of 4.1190%. ).
The benchmark 10-year yield also stood above 4%, at 4.0976%.
“We believe the FOMC will remain in a wait-and-see position, not only with respect to the federal funds rate at its January meeting, but also with respect to its policy guidance,” Wells Fargo economists said ahead of next week’s Fed meeting.
“While progress in reducing inflation over the past six months argues in favor of lowering interest rates soon, the economy’s recent performance does not suggest an imminent need for easing.
In cryptocurrencies, bitcoin fell 0.24% to $39,720, after slipping below the $40,000 level in the previous session for the first time since the launch of 11 traded funds on the spot bitcoin exchange on January 11.
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