SINGAPORE- The US dollar barely moved in Asian trades on Monday, even as sterling blipped higher and the yen dipped, as a Japanese holiday and a bunch of upcoming central bank meetings sucked the air out of markets.
The Bank of Japan’s policy meeting on Friday is the highlight of the week in Asia, after Governor Kazuo Ueda stoked speculation of an imminent move away from ultra-loose policy.
That’s made the BOJ somewhat of a standout in a week packed with central bank meetings, with the US Federal Reserve seen doing a hawkish pause on Wednesday and Bank of England possibly raising rates one last time on Thursday.
The yen was flat versus the greenback between 147.63 and 147.88 per dollar, with markets in Japan closed for a national holiday. In the days since Ueda’s remarks about a early move from negative rates, it has dropped 1.3 percent and taken losses for 2023 to more than 11 percent .
Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, said she expects the yen to be volatile leading up to the policy meeting and that investors may have potentially misinterpreted Ueda’s comments.
The recent spell of weakness in Japanese wages and possibility prices too could soften and push the BOJ farther from its inflation goal, the case for a BOJ policy tightening is still not very strong, Kong said.
“In terms of the direction of travel, dollar/yen can definitely track higher…particularly if Governor Ueda sounds dovish and dashes hopes of policy tightening at the upcoming meeting,” she said.
Wei-Liang Chang, FX and credit strategist at DBS Bank, said market participants expect the BOJ could give guidance on when its negative interest rate policy will be reversed and the path of rate hikes beyond that.
“Anticipation of new BOJ rate guidance could support the yen into the meeting date, with the FOMC meeting also contributing to volatility this week,” Chang said. – Reuters
