U.S. Dollar Slips, Yen Holds Ground Ahead of BOJ Meeting
U.S. Dollar Edges Lower in Early European Trade
The U.S. dollar edged lower in early European trade Monday, while the Japanese yen gave back some of last week’s gains ahead of the conclusion of a key policy meeting by the Bank of Japan.
Fed’s Dovish Pivot Hits the Dollar
The dollar retreated sharply last week after the U.S. Federal Reserve pivoted towards rate cuts at its latest policy meeting, with traders now fully expecting an interest rate reduction at least by the start of summer next year. The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 102.052 at 05:35 ET (09:35 GMT), after dropping roughly 1.3% last week.
Yen Steadies Ahead of BOJ Meeting
Elsewhere, the Japanese yen traded 0.1% higher at 142.30, with the Japanese yen giving back some of last week’s nearly 2% gains. The Bank of Japan concludes its two-day monetary policy meeting on Tuesday, with traders uncertain of when the dovish central bank starts to unwind its ultra-loose policy settings.
Euro Still Weighed by Weak German Outlook
The euro rose 0.3% to 1.0922, with the euro boosted by the relatively hawkish nature of comments from the European Central Bank last week, when compared with the dovish pivot from the Fed. That said, the single currency continues to be weighed by a darkening growth outlook in the eurozone, typified by German business morale unexpectedly worsening in December, according to data from the Ifo institute. The Ifo Business Climate Index stood at 86.4 in December, a retreat from the revised reading of 87.2 in November.
U.K. Inflation Data and Other Currencies
The pound rose 0.1% to 1.2687, ahead of the latest U.K. inflation data later this week. U.K. inflation is expected to have risen 4.3% in November on an annual basis on Wednesday. While this represents a drop from 4.6% the previous month, it’s still more than double the BoE’s 2% medium-term target, making rate cuts a more distant prospect. Elsewhere, the Chinese yuan traded 0.2% higher at 7.1318, while the New Zealand dollar rose 0.6% to 0.6734, as the Aussie dollar, a major indicator of risk sentiment, remained in a buoyant mood.
