Currencies Hold Steady Amid Rate Cut Speculation

16 Sep 2024 , 10:23 AM

The yen hovered near its year-highs on Monday, with trade slowed by a Japanese holiday, as market participants speculated on the amount of the Federal Reserve’s almost-certain rate cut later this week.

Trading in Asia was quiet, with markets in Japan, China, and South Korea closed for the holidays.

The dollar was unchanged at 140.86 yen, close to where it finished last week and the 140.285 end-of-December low it hit on Friday. It dropped 1.3% against the yen last week.

The Fed’s meeting on September 17-18 is the centrepiece of a hectic week in which the Bank of England and Bank of Japan will announce policy decisions on Thursday and Friday.

Treasury yields have been declining in the run-up to the highly anticipated meeting, particularly as the Fed’s chances of cutting rates by half a point rise.

Benchmark 10-year rates were last seen at 3.65%, unchanged from Friday. These rates have fallen by 30 basis points in the last two weeks. Two-year rates, which are more closely tied to monetary policy expectations, were at 3.57%, down from around 3.94% two weeks ago.

A quarter-point reduction by the Fed as it begins its rate lowering is still seen the slightly more likely outcome, if only marginally so.

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