Market Analytics and Considerations
Key Notes
In Wednesday’s sparse trading in Europe, the U.S. dollar was basically steady, but it gained versus the Japanese yen after the Bank of Japan’s latest statements indicated that its supportive monetary policy is likely to continue.
The Dollar Index, which compares the dollar to a basket of 6 major currencies, was mostly unchanged at 103.870 at 02:35 ET (07:35 GMT), up from its lowest point as of semi at 103.44 on Dec 14.
After falling as deep as 130.58 just over a week earlier when the BOJ revealed the easing of the 10-year Japanese government bond yield policy range, USD/JPY increased 0.3% to 133.86, making a comeback. As a result, there have been suspicions that perhaps the central bank would be tightening its ultra-loose monetary and fiscal policy.
Nevertheless, according to the opinions of policymakers in the notes of the Meeting in December, the BOJ’s shift in stance was intended to ensure the efficient operation of the Japanese government bond market, not to alter the course of policy.
This is what has hurt the Japanese yen, especially when compared to the dollar, as it signals that sleek policies will remain. Drops, though, have been kept in check due to the Christmas season and a lack of confidence in the BOJ’s ability to uphold this position over the long term, particularly since Japan’s consumer inflation reached a four-decade peak of 3.7percentage points in November.
Wednesday is the deadline for a variety of US economic reports, including the Redbook, the Richmond Manufacturing Index, and pending home sales.
With no significant euro-related data releases due in the next two weeks—at certainly not until the German CPI results for December in early January—and no presenters from the European Central Bank planned, EUR/USD increased 0.1% at 1.0650, remaining in a narrow trading range.
The risk prone AUD/USD increased 0.5% reaching 0.6763, while GBP/USD increased 0.2% to 1.2044, slightly above its bottom for the month of 1.1993, recorded on December 22.
Traders were encouraged by China’s declaration on Monday that it would stop requiring incoming visitors to undergo quarantine beginning on January 8 as USD/CNY increased 0.2% to 6.9721.
