June 19, 2023 (MLN): The U.S. dollar was searching for direction on Monday as investors continued to digest last week's raft of central bank meetings, including a decision from the Bank of Japan to stick with its ultra-easy policy that is keeping the yen fragile, as reported by Reuters.
The dollar index, which measures the U.S. currency against six major rivals, rose just 0.029% to 102.31, not far from a one-month low of 102.00 it touched on Friday. U.S. markets are closed on Monday for a holiday.
In a busy week for central banks, the Federal Reserve left interest rates unchanged on Wednesday but hinted that further hikes were on the way to tame inflation.
The European Central Bank raised interest rates by 25 basis points on Thursday and left the door open to more hikes, while the Bank of Japan rounded off the week.
"The Fed's hawkish hold means that the bar to a hike next month is low," said Marc Chandler, chief market strategist at Bannockburn Forex in New York. Chandler said the market seems sceptical of the Fed's forecast for two more hikes this year.
Instead, most investors expect the central bank to be done with its tightening in July. Markets are pricing in a 72% probability of the Fed hiking by 25 basis points next month but stopping after that, the CME FedWatch tool showed.
Moh Siong Sim, a currency strategist at Bank of Singapore, said many investors believe that if the Fed hikes in July, the next hike would likely be in October or November and by then inflation could ease enough to not warrant another hike.
"I think that's what the market is expecting, whether that's realistic or not, that's open to debate."
The market is set to hone in on Fed Chair Jerome Powell's testimony later this week to Congress, where analysts expect Powell to take a hawkish stance. Fed officials have struck a hawkish tone since the meeting.
As widely expected, the BOJ on Friday maintained its -0.1% short-term rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy, pushing the yen broadly lower against major currencies.
Against the dollar, the yen touched a near seven-month low of 141.975 earlier on Monday. It last fetched 141.53 per dollar.
The yen fell to a fresh 15-year low against the euro of 155.355 earlier in the session before reversing to last trade at 154.79. Against sterling, it hit 182.11 per pound, its lowest since December 2015.
Meanwhile, the euro was at $1.0935, hovering near a one-month peak. The single currency has gained more than 2% since the beginning of June.
After steep climbs last week including to multi-month highs on Friday, the Australian dollar slid 0.48% to $0.684 and the kiwi lost 0.30% to $0.621.
Sterling eased 0.04% to $1.2812, but was not far from a near 14-month peak, ahead of Bank of England's policy meeting on Thursday.
"There is expectation and there is a need as well," said Bank of Singapore's Sim. "UK stands out as the country with a still problematic inflation story, and the Bank of England is under pressure to respond to the inflation problem."
Copyright Mettis Link News
Posted on: 2023-06-19T12:43:56+05:00
