On Monday, the yen ticked lower, easing to 154.24 yen against the dollar early in the Asian trading day, a 0.29% rise for the dollar after the yen’s recent surge to 151.945, its strongest in 12 weeks. This shift comes after the yen’s remarkable performance last week, where it gained 2.36% against the dollar, marking its best week since late April.
See: Japanese Yen sees a decline on the VT Markets app.
The decline in yen demand coincides with a robust recovery in equity markets, reducing the need for safe-haven assets. Japan’s Nikkei stock average jumped over 2%, signaling renewed investor confidence.
Traders are now keenly awaiting the Bank of Japan (BOJ) and Federal Reserve meetings on Wednesday for further market cues. Speculation is rife that the BOJ might raise interest rates and cut its monthly bond purchases significantly. The BOJ had committed to outlining its quantitative tightening (QT) plans at this meeting during its last gathering.
If the BOJ refrains from hiking rates, it might announce a more aggressive QT program to prevent a “sell-the-rumor, buy-the-fact” reaction in USD/JPY.
The Federal Reserve is expected to keep rates unchanged this week, with a possible rate cut in September. This dovish stance could influence yen demand, especially if U.S. stock performance falters. This week’s earnings reports from tech giants like Amazon, Apple, Meta, and Microsoft are also likely to impact market sentiment and currency movements.
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Sterling remained steady near a 2-1/2-week low against the euro ahead of the Bank of England’s policy announcement on Thursday. It traded at $1.2882, adding 0.12%. The market views the odds of a rate cut on Thursday as a coin toss, creating a cautious atmosphere.
The euro gained 0.25% against the yen, reaching 167.37 yen, and stayed flat against the dollar at $1.0859. It slightly eased to 84.32 British pence, maintaining proximity to its recent high of 84.48 pence, the strongest since July 10.
The BOJ’s actions will significantly influence the yen, while the Federal Reserve’s stance could affect the dollar’s strength. Investors should brace for volatility, particularly in response to corporate earnings and policy announcements this week.
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