Dollar climbs while yen steady ahead of key central bank decisions
The dollar was last flat at 153.80 yen, reversing an earlier decline of as much as 0.49 per cent to the cusp of 153 at one point
THE dollar ticked higher on Monday (Jul 29) as traders looked ahead to policy decisions by the Federal Reserve and Bank of Japan on Wednesday (Jul 31) for further direction.
The yen held steady, meanwhile, following the Japanese currency’s best weekly rally since late April on the back of shifting interest rate expectations and a stock-market sell-off.
The dollar index, which measures the currency against the yen and five other major peers, rose 0.22 per cent to 104.59. The euro slipped 0.35 per cent to US$1.08175 while the pound was down 0.31 per cent to US$1.2827.
The dollar was last flat at 153.80 yen, reversing an earlier decline of as much as 0.49 per cent to the cusp of 153 at one point.
Markets have been focused on the surge in the yen over the last week, with rising speculation of a BOJ interest rate hike this week helping buoy the currency.
The US Federal Open Market Committee (FOMC) is widely expected to leave rates unchanged this week, but cut them by a quarter point at the following meeting in September.
The Fed decision poses a risk to the dollar/yen pair, said Kristina Clifton, senior economist and chief currency strategist at Commonwealth Bank of Australia.
“Any hints of loosening by the FOMC could pull USD/JPY down significantly, but a hawkish FOMC will probably have little impact,” she added.
Data released on Friday showed investors have sharply cut back on their bets against the yen, which was trading at a 38-year low at the start of the month.
“Sentiment remains fragile,” said Shinichiro Kadota, a currency and rates strategist at Barclays in Tokyo.
Ultimately, “US equities are still the key,” Kadota added, referencing the demand for safe-haven currencies like the yen seen during last week’s stock market rout. “Market moves have been led by US equities, and we need to see if things stabilise there.”
The US earnings calendar this week is populated with heavyweights including Amazon, Apple, Meta and Microsoft.
Investors were also wary of further geopolitical volatility, with Israel weighing a response to a deadly rocket strike in the Israeli-occupied Golan Heights which Israel and the United States blamed on Lebanese armed group Hezbollah.
Currency traders also need to contend with not just the BOJ and Fed on Wednesday, but the Bank of England a day later.
Sterling fell as investors looked towards the BOE meeting, where the market sees the odds of a first rate cut as a coin toss. British bond yields fell on Monday, pulling the pound lower.
Elsewhere, the Australian dollar was slightly lower at US$0.6542, attempting to recover from Friday’s low of US$0.65105, a level not seen since the start of May.
Leading cryptocurrency bitcoin advanced 3 per cent to US$69,540, receiving some support from positive comments from Republican presidential candidate Donald Trump, who told a bitcoin conference on Saturday that the US must dominate the sector or China would. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
