Global Currency Market Update
The Dollar and Yen in Holiday-Thinned Trade
The dollar is struggling to stabilize in light trading on Tuesday, as signs of cooling inflation in the U.S. indicate potential interest rate cuts by the Federal Reserve next year. Meanwhile, the yen is holding steady near a five-month high, fueled by speculation that the Bank of Japan may soon end its ultra-easy policy.
Muted Currency Moves After Christmas
Currency movements remained subdued on the day after Christmas, with markets in the UK, Australia, New Zealand, and Hong Kong still closed for public holidays.
New Zealand and Australian Dollars Rise
The New Zealand dollar reached a five-month peak of $0.6325 against the greenback, while the Australian dollar hovered near its recent five-month high at $0.6817.
Euro and Sterling Show Minor Movements
The euro inched 0.03% higher to $1.1024, while sterling remained relatively unchanged at $1.2706.
Fed’s Consideration of Rate Cuts
Following the release of U.S. data indicating a fall in prices and a decrease in annual inflation, market expectations of a Fed interest rate cut in March 2022 have risen. This comes after the Fed policymakers left the door open for rate cuts in 2024 during the central bank’s final policy meeting of the year.
BOJ’s Inflation Target and Monetary Policy
The yen is holding strong at 142.25 per dollar in Asia, supported by comments from BOJ Governor Kazuo Ueda. He mentioned that the likelihood of achieving the central bank’s inflation target is increasing, hinting at a potential change in the ultra-loose monetary stance.
Japan’s Economic Indicators
Recent data from Japan showed that the jobless rate remained steady at 2.5% in November, while business-to-business service inflation held at 2.3% last month.
Chinese Yuan’s Movement
The Chinese yuan dipped against the dollar amid expectations of further monetary easing measures by the People’s Bank of China. Several state banks and listed banks have lowered interest rates on deposits, indicating a move towards easing monetary policy.
Overall Market Movement
The global currency market remains relatively stable, with various currencies holding their positions amid holiday-thinned trade and central bank policies.
