Dollar falls Yen strengthens on Asia FX
2023.01.16 01:46
Dollar falls Yen strengthens on Asia FX
By Kristina Sobol
Budrigannews.com – On Monday, traders increased their wagers on the possibility that the Bank of Japan will make additional adjustments to its yield control policy at its meeting this week, causing the yen to surge to an over seven-month peak and the dollar to fall to a seven-month low against major peers.
After reaching as high as $0.7019 earlier in the session, the gained 0.29 percent to $0.6995, breaking through the crucial $0.7000 level for the first time since August.
The euro also reached a nine-month high of $1.0874 before closing 0.23 percent higher at $1.08565.
After data showed that U.S. consumer prices fell for the first time in more than two and a half years in December, the fell to a seven-month low of 101.77 against a basket of currencies. The index closed at 101.95, down 0.3 percent.
Investors are now becoming increasingly confident that the Fed is nearing the end of its rate-hike cycle and that rates will not rise as much as they had feared, as the world’s largest economy’s decades-high inflation shows signs of cooling.
Analysts at OCBC stated, “The confirmation of a deceleration in price pressures is building up hopes that CPI could fall further in the coming months.”
“Expectations that the Fed could again scale back on its pace of hike beyond the February FOMC or even position for an earlier pause or dovish pivot can be reinforced by an entrenched disinflation trend.”
The 8% rise in the dollar’s value last year was largely attributed to the Fed’s aggressive rate increases.
When the Federal Reserve makes its policy decision in February, the markets are now pricing in a 91% chance of a 25-basis-point increase and a 9% chance of a 50-basis-point increase.
Market sentiment was dominated on Monday by expectations that the BOJ would make additional adjustments to or completely abandon its yield control policy when it announces its monetary policy decision on Wednesday. As a result, the Japanese yen reached a peak on Monday that was more than seven months old.
The yen reached a high of 127.67 dollars per yen, an increase of approximately 0.5 percent.
According to Ray Attrill, head of FX strategy at National Australia Bank (OTC:), “I think the whole world will be focused on Wednesday… and probably the week in G10 (currencies) will be defined by what happens to the yen and yen crosses, out of that.” NAB).
“I don’t think (the BOJ) has the luxury of time to say that they’re going to assess and wait until Q2 or Kuroda to see out his term without making any further changes,” the BOJ’s statement reads.
The BOJ’s ultra-easy monetary policy, which saw the yield on Japan’s benchmark 10-year government bonds breach the central bank’s new ceiling for two sessions, has been the subject of investor demand.
The yen fell 12 percent last year as a result of the BOJ’s policy of controlling the yield curve. Since the central bank made the unexpected decision in December to widen the band surrounding its yield target, the yen has increased by more than 6 percent.
The British pound was last up 0.23 percent at $1.2262 in other places, after reaching a one-month high of $1.2288 earlier.
The hit a one-month high of $0.64255 earlier in the session and gained 0.34 percent to $0.64065.
Monday is a holiday in the United States, so there will be little trading.
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