US dollar holds just below 150 yen ahead of busy central bank, data-packed week

THE US dollar eased a touch on Monday (Oct 30), and the yen managed to stay on the stronger side of 150 per US dollar, as traders looked ahead to several major central bank meetings and a slew of economic data releases this week.

The Bank of Japan (BOJ) kicked off its two-day monetary policy meeting on Monday, leading a week that will also see interest rate decisions from the US Federal Reserve and the Bank of England (BOE).

A deluge of purchasing managers’ surveys, eurozone inflation and GDP data, and US nonfarm payrolls at the end of the week will also be competing for the top of traders’ minds.

“It is another busy week for FX markets, with important central bank meetings taking place around the world and some top-tier macro data too, said Chris Turner global head of markets at ING in a morning note.

“On paper, there should not be enough out there to knock the US dollar’s dominance this week, but focus on the US quarterly refunding could throw some curveballs.”

That funding announcement comes as mounting deficits and a heavier interest rate burden have substantially increased the US Treasury’s funding needs. Since the last refunding announcement in August, borrowing rates have spiralled to their highest since 2006-07.

The US dollar index was last down 0.14 per cent at 106.45, hurt by a small pick up in the euro, which gained 0.17 per cent to US$1.05835.

The common currency has had a quiet October, and still is not far off a 10-month low of US$1.0448 hit at the start of the month.

In the mix in Europe on Monday was cooling German state inflation data, which pointed to slowing headline inflation in the eurozone’s largest economy, and a separate release showing German gross domestic product fell by 0.1 per cent quarter on quarter, though this was above expectations.

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Of the three central bank meetings, the BOJ’s is attracting the most scrutiny from investors given heightened speculation over a policy tweak.

A recent surge in global interest rates has heightened pressure on the BOJ to change its bond yield control policy, as speculation mounts that the central bank could hike its existing yield cap at this week’s meeting.

The Fed and BOE are both expected to keep rates steady so, barring any surprises, the focus will be more around the message the policymakers communicate.

The yen was little changed at 149.75 per US dollar, getting a slight reprieve after having struck a one-year trough of 150.78 per US dollar last week.

The pound was steady at US$1.2125.

US nonfarm payrolls data on Friday will also be important for expectations of the Fed’s rate hike path.

“October’s jobs report takes on added importance on the back of September’s dramatic outcome, when net of revisions the cumulative payroll gain was 455k. The report will help to determine whether September was more signal or noise,” said BNP Paribas analysts in a note.

“We expect a 190k payroll print – still sturdy but not compellingly pointing to reacceleration. However, another firm print would likely see long-end yields increase further as the market reassess the degree of policy-rate restriction and inflation expectations rise,” the note added. REUTERS