The primary topic of discussion was the Federal Reserve’s December meeting minutes, and the yen rose to a seven-month high on growing speculation that the Bank of Japan might abandon its ultra-accommodative monetary policy.
On Wednesday, the Fed will release the minutes from its December meeting, and traders will look for indicators of the likely rate path for 2023. After four consecutive 75-basis point rate hikes this year, the U.S. central bank increased interest rates by 50 basis points last month. However, the bank has stated that interest rates may need to remain higher for longer to control inflation.
The dollar index, which compares the dollar value to six other major currencies, most recently increased by 0.9% to 104.55. Due to the Fed raising interest rates to combat inflation, the index increased by 8% last year, its largest annual increase since 2015.
The employment market in the United States is predicted to remain tight when the payroll data is released on Friday.
The Fed had emphasized the significance of the payroll data for the inflation outlook. Still, they pointed out that neither wage growth nor inflation had been the cause of the latter.
The Japanese government intervened in the market to support it in September for the first time since 1998. They did so again in October when it fell to a 32-year low of 151.94 per dollar, causing the Asian currency to lose 12% of its value against the dollar in 2022.
The euro last traded at $1.0553 against the dollar, down about 1%.
The focus was on German state inflation data, which showed a reduction in price pressures in December, suggesting that national inflation may have also slowed for a second month due to the government’s one-time payment of household energy bills.
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