The U.S. dollar has fallen to a two-week low against the yen, as traders anticipate several major central bank meetings and economic data releases this week. The Bank of Japan (BOJ) began its two-day monetary policy meeting on Monday, which will be followed by interest rate decisions from the U.S. Federal Reserve and the Bank of England (BoE).
Additionally, this week will see the release of purchasing managers’ surveys, euro zone inflation and GDP data, and U.S. nonfarm payrolls. Despite the decline in the U.S. dollar, analysts believe that the market has not yet fully accounted for the resilience of the U.S. economy, particularly in light of strong consumer data.
Furthermore, the U.S. Treasury’s quarterly refunding announcement on Wednesday is expected to impact both the bond and currency markets. The Treasury’s funding needs have significantly increased due to mounting deficits and a heavier interest rate burden. Borrowing rates have reached their highest level since 2006-07.
The dollar index, a measure of the currency against a basket of major rivals, was down 0.30% at 106.60, having reached a one-week low of 106.22 earlier. The euro, on the other hand, gained 0.4% to $1.0605.
The financial developments in Europe also contributed to the fluctuation of currencies. Cooling German state inflation data indicated a slowdown in headline inflation in the euro zone’s largest economy. However, German gross domestic product fell by only 0.1% quarter on quarter in the third quarter, which exceeded expectations.
Investors are most closely watching the BOJ’s meeting, as there is speculation about a possible policy change. The recent surge in global interest rates has increased pressure on the BOJ to adjust its bond yield control policy. The Fed and the BoE, on the other hand, are expected to keep rates steady, with the focus being on the message conveyed by policymakers.
The yen remained relatively stable against the dollar, while the pound gained 0.2% to $1.2141. The upcoming U.S. nonfarm payrolls data will play a significant role in shaping expectations regarding the Fed’s path for rate hikes. Economists are predicting the addition of 188,000 new U.S. jobs for the month of October.
Overall, the currency market is bracing for a week of important central bank meetings and economic data releases, which will significantly impact exchange rates and financial markets.
More detail via Kitco.com here… ( Image via Kitco.com )