Tue, May 21, 2024

The Long-Awaited BOJ Meeting is Pushing Yen Down

Japanese Yen

The Japanese yen slipped as the Bank of Japan maintained its ultra-low interest rates and dovish approach on Friday. The U.S. dollar steadied in early European trade on Friday ahead of the publication of important inflation data.

The Dollar Index measures the dollar’s value against six other currencies. It was trading flat at 110.475 at 03:05 ET (07:05 GMT) after reporting a gain of around 0.8% the previous day. The euro had a steep decline on Thursday. It followed a rate increase by the European Central Bank of 75 basis points. However, a more cautious view of rates gave the dollar some boost on the day. However, this came after earlier weakness as anticipations for the Federal Reserve to change its course and adopt a less accelerated pace of monetary tightening has grown.

Here Is What Investors Are Watching For

In light of this, traders will pay close attention to the publication of the core PCE price index, the Fed’s preferred inflation indicator. It will come later in the afternoon. It will show hints about the intentions of the central bank officials at the policy-setting meeting next week. This is anticipated to show a 0.5% month-over-month growth in September, a modest decrease from the 0.6% gain in August.

After the BOJ maintained its -0.1% objective for short-term interest rates and its promise to steer the yield on 10-year bonds at 0%, USD/JPY increased 0.1% to 146.43. However, the Japanese central bank increased its inflation projections through 2024, signaling further short-term economic hardship for the country and adding pressure on the yen.

The ECB indicated a less aggressive pace of rate rises. Its September statement eliminated a reference to rising rates over the next several meetings. The EUR/USD gained 0.1% to 0.9969, coming near parity following significant overnight losses. According to an official preliminary assessment released Friday, the French economy grew by 0.2% in the third quarter. It was aligned with predictions but lower than the 0.5% quarterly growth in the second quarter.

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