In Asia on Tuesday morning, the dollar, the Japanese yen, and the Australian dollar were all down. Lockdowns were imposed in several Chinese cities due to the recent COVID-19 outbreak. However, the attention remains squarely on the Federal Reserve’s March policy announcement.
The US Dollar Index measures the dollar’s value against a basket of other currencies. By 11:07 p.m. ET, it had fallen 0.08 percent to 98.948. At 3:07 AM GMT, The Bank of Japan (BOJ) announced its policy decision on Friday; hence, the USD/JPY pair rose 0.11 percent to 118.31. The AUD/USD exchange rate fell 0.08 percent to 0.7181. The NZD/USD pair fell 0.01 percent to 0.6744 after the Reserve Bank of Australia issued the minutes from its most recent meeting earlier in the day.
The USD/CNY exchange rate increased by 0.16 percent to 6.3754. According to figures released earlier in the day, fixed asset investment in China increased 12.2 percent year over year in February. Industrial production increased by 7.5 percent, retail sales increased by 6.7 percent year over year, while the jobless rate remained 5.5 percent. The GBP/USD pair rose 0.20 percent to 1.3026, ahead of the Bank of England’s policy announcement on Thursday.
The Fed’s Decision Approaching
Fed should raise interest rates for the first time since the epidemic. According to the CME’s Fed Watch tool, investors predict a 25 basis point hike at this meeting. However, due to rising inflation fears, pricing has risen to reflect a 70% possibility of a higher 50 basis point hike at the May 2022 meeting.
The dollar index was hovering at 99.415, its highest level since May 2020, reached a week ago. The yen has dropped sharply in recent sessions, as the disparity between the Fed’s and the BOJ’s policies becomes more apparent. The yen’s safe-haven allure was eroded by hopes that Ukraine and Russia would seek a diplomatic solution to the conflict sparked by Russia’s incursion on February 24.