Dollar Holds Steady as BOJ Speculation Swirls

23 Jan 2024 , 08:25 AM

In anticipation of the Bank of Japan’s (BOJ) much-awaited policy announcement, whereby it is expected that the central bank will maintain its ultra-loose monetary policy settings, the yen lingered close to a two-month low on Tuesday.

In other news, the US dollar remained relatively stable while the New Zealand dollar fell to a two-month low of $0.60625, under pressure from the US dollar’s strength and China’s uncertain economic outlook.

The large differences in interest rates between Japan and the US continue to weigh heavily on the yen, which was last trading at 148.13 to the dollar, not too far from its almost two-month low of 148.80 last week.

Tuesday marks the end of the BOJ’s two-day monetary policy meeting, but any hopes of the bank rolling back its negative interest rate policy this month have been dashed in the aftermath of the tragic earthquake that struck the nation on New Year’s Day and the dovish remarks made by BOJ Governor Kazuo Ueda.

The central bank’s set of economic forecasts in its quarterly outlook report will also be of interest.

This week’s meeting of the European Central Bank (ECB) is anticipated to result in a continuation of the current deposit rate at 4.00%.

President Christine Lagarde and other ECB officials have resisted market expectations for an early rate reduction.

The euro has benefited somewhat from this, as it has mainly moved sideways over the last several days. In early Asian trading, it decreased by 0.06% to $1.0879.

The kiwi was recently seen at $0.6074 on the larger market, failing to recover from its two-month low.

On Wednesday, the nation’s fourth-quarter inflation figure is expected, which will shed more light on when the Reserve Bank of New Zealand (RBNZ) might start lowering interest rates.

The Australian dollar increased by 0.06% to $0.6574 while the pound fell by 0.03% to $1.27075.

As traders reduced their expectations for a rate decrease by the Federal Reserve in March, the dollar index held at 103.36, not too far from its almost one-month high of 103.69 achieved last week.

This has maintained support for U.S. Treasury yields, with the two-year yield recently rising by more than 25 basis points from its low of 4.1190% in January to 4.3847%.

The benchmark 10-year yield, which was recently at 4.0976%, also ended up above 4%.

In terms of cryptocurrencies, bitcoin dropped 0.24% to $39,720 in the previous session, its first dip below $40,000 since the January 11 launch of 11 spot bitcoin exchange-traded funds.

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