BOJ jitters weaken yen, dollar holds steady

18 Mar 2024 , 09:32 AM

With the Bank of Japan looking on the verge of eliminating negative rates and the attention on how many rate cuts the Federal Reserve anticipates, traders were anticipating a week filled with central bank meetings around the globe, but the dollar remained stable on Monday.

Other than the United States and Japan, the central banks of England, Australia, Norway, Switzerland, Mexico, Brazil, and Indonesia are scheduled to meet; the majority are anticipated to maintain their current rate of interest.

The BOJ is the centre of attention in Asia as the larger-than-expected pay increases by significant Japanese companies solidified predictions that the central bank will usher in a new era by terminating zero interest rate policy, possibly as soon as this week.

The Japanese yen is still up 0.5% in March vs the US dollar, after plunging to its lowest level in almost a week on Monday (a loss of 0.13%).

The markets are pricing in a 39% chance that the BOJ will act on Tuesday, but it is possible that the central bank will decide to wait until its April meeting.

In addition to Japan, Australia’s central bank is scheduled to meet on Tuesday and is predicted by economists surveyed by Reuters to maintain rate stability, with at least two rate reductions in the last quarter of 2024.

At $0.6560, the Australian dollar barely moved from its near-week-long low. The Australian dollar has gained almost 1% so far in March.

Ahead of the Bank of England meeting on Thursday, when the central bank is anticipated to maintain its current pace of increase, the euro was down 0.04% to $1.0883, while the pound was last trading at $1.2729, down 0.08% on the day.

Ahead of the Fed meeting this week, the dollar index, which compares the value of the US dollar to six rival currencies, including the euro and yen, was at 103.48. It had previously reached a high of 103.50, its highest level since March 6.

The U.S. central bank is not anticipated to change interest rates, but traders have reduced their bets on future reductions as a result of last week’s hotter-than-expected U.S. producer and consumer pricing data.

This year, traders are already factoring in 72 basis points of cutbacks, with a 56% possibility of the first rate cut taking place in June, according to CME FedWatch tool.

The question now centres on whether the decision-makers will alter their dot plots, or rate-cut estimates, for this year. In December, the Fed predicted three rate cuts, or 75 basis points, in 2024.

In other cryptocurrency news, after reaching a record high of $73,803 last week, bitcoin was down 1.3% at $66,983. Ether fell 1.75% to $3,565.80.

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