The dollar fell to a seven-month low versus major peers on Monday. Meantime, the yen soared to a more than seven-month high as traders increased their bets that the Bank of Japan might make additional adjustments to its yield control policy at its meeting this week.
After reaching a high of $0.7019 earlier in the session, the Australian dollar broke through the crucial $0.7000 level for the first time since August. It most recently increased by 0.29% to $0.6995.
The euro reached a nine-month high of $1.0874 and traded 0.23% higher at $1.08565. After data revealed that U.S. stocks were down from their lows last week, the dollar kept falling. For the first time in more than two and a half years, consumer prices decreased in December, falling to a seven-month low of 101.77 points. The index last moved down 0.3% to 101.95.
Investors are becoming more confident that the Fed is nearing the end of its rate-hike cycle. The world’s largest economy has experienced decades-high inflation that is now showing signs of cooling.
The markets are currently pricing in a 91% chance of a 25 basis point increase and a 9.4% chance of a 50 bp increase when the Fed announces its policy decision.
Yen Reaches a 7-Month High
The market’s expectations that the BOJ would make additional adjustments to, or completely abandon, it’s yield control policy when it announced its monetary policy decision on Wednesday drove the Japanese yen to a more than seven-month high on Monday.
Investor pressure on the BOJ to change its ultra-accommodative monetary policy has led to Japan’s benchmark 10-year government bond yield exceeding the new ceiling for two sessions.
Since the BOJ’s surprise decision to widen the band around its yield target in December last year, the yen has increased by more than 6%. The yen’s 12% decline in value last year resulted from the central bank’s yield curve control policy.
In other news, the British pound hit a one-month high of $1.2288 before closing up 0.23% at $1.2262.