SINGAPORE: On Thursday, the yen lingered on the weaker side of 155 per dollar as the Bank of Japan (BOJ) commenced its two-day rate-setting meeting, leaving traders apprehensive about potential intervention from Tokyo while policy discussions unfold.
After trading within a narrow range in recent days, the dollar finally surpassed the 155 yen threshold for the first time since 1990 in the previous session, stabilizing at 155.34 yen during early Asia trading.
Speculation about intervention by Japanese authorities to bolster the yen had hindered the dollar’s climb toward the psychologically significant level, viewed by some market participants as a trigger for action from Tokyo.
The breach of the 155 yen mark coincides with the BOJ’s deliberations on monetary policy, although expectations lean towards the central bank maintaining its short-term interest rate target unchanged following last month’s notable departure from negative rates.
“We anticipate a slightly hawkish stance from the BOJ meeting,” said Carl Ang, fixed income research analyst at MFS Investment Management. “Regarding policy signals, it seems premature to deviate from the BOJ’s March communication that accommodative financial conditions will persist for the foreseeable future.”
BOJ Governor Kazuo Ueda remarked earlier this week that the central bank would raise interest rates further if trend inflation progresses towards its 2% target as anticipated.
In the broader market, the dollar exhibited strength, recouping some losses following a minor setback earlier in the week spurred by positive business activity data from the euro zone and the UK, which subsequently lifted the euro and sterling.
The euro saw a marginal increase to $1.0702, but retreated slightly from the over one-week high reached on Wednesday, while sterling dipped marginally to $1.2463.
The dollar steadied at 105.79 against a basket of currencies, rebounding from nearly a two-week low observed in the prior session.
Trading activity in Asia was subdued with Australia observing a holiday.
The Australian dollar inched up by 0.04% to $0.6500, buoyed by diminishing expectations of rate cuts from the Reserve Bank of Australia (RBA) this year following a lower-than-expected slowdown in consumer price inflation in the first quarter.
“Inflation is moderating, but there’s still a way to go before the RBA can be confident about it returning to the 2–3% target range within the desired timeframe,” said Justin Smirk, senior economist at Westpac. “Consequently, we anticipate the RBA to maintain the status quo in May, pushing back the timeline for our first anticipated rate cut to November from previously expected September.”
The New Zealand dollar advanced by 0.08% to $0.5940.
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