Dollar Down, Yen Reacts to Bank of Japan Policy Decision

The dollar was down on Tuesday morning in Asia, while the latest policy decision from the Bank of Japan dictated the yen’s moves.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.08% to 95.127 by 10:08 PM ET (3:08 AM GMT).

The USD/JPY pair edged up 0.12% to 114.73.

The AUD/USD pair edged up 0.17% to 0.7222 and the NZD/USD pair edged up 0.14% to 0.6806.

The USD/CNY pair edged down 0.11% to 6.3410 while the GBP/USD pair edged up 0.11% to 1.3659.

The Bank of Japan handed down its policy decision earlier in the day, with the interest rate steady at –0.10%.

The dollar’s weakness came despite a continual rise in U.S. Treasury yields. Two-year yields rose above 1% for the first time since February 2020 as the Asian session opened and as trade resumed after a holiday in the U.S. Five-year yields rose 3.6 bps to 1.5960%, the highest since January 2020.

Yields have been on an upward trend in 2022, with investors expecting the U.S. Federal Reserve to begin interest rates hikes as soon as March.

“The conundrum everyone is grappling with is either the dollar is a screaming buy relative to yields, or there is a lot of dollar supportive news priced in,” National Australia Bank head of FX strategy Ray Attrill told Reuters.

Theories for the anomaly included investors reacting early to the fact the dollar has historically peaked around the time the Fed has raised rates, or they were trading in anticipation of a surge in global economic growth, he added. However, Attrill was not convinced by either argument.

Meanwhile, expectations that the Bank of England will hike its own interest rates gave the pound a boost. Any weakness in the currency as Prime Minister Boris Johnson faces calls to resign would be contained, according to ING analysts.

Although no major economic data is due from the euro zone throughout the week, investors look to speeches from European Central Bank (ECB) President Christine Lagarde and colleagues, as well as the minutes from the central bank’s December policy meeting due on Thursday.

In cryptocurrencies, bitcoin traded at $42,353, continuing the downward trend it has been on ever since hitting a record high of $69,000 in November 2021.


Other news