Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Japanese yen slides after BOJ keeps dovish course; Asia FX muted

Published 12/18/2023, 11:40 PM
© Reuters.
- The Japanese yen fell sharply on Tuesday after the Bank of Japan maintained its ultra-dovish stance and offered no cues on a planned pivot, while broader Asian currencies were muted as a post-Federal Reserve rally cooled. 

Resilience in the dollar also weighed on regional units, as some Fed officials downplayed enthusiasm that interest rate cuts by the central bank were imminent.

Japanese yen tumbles as BOJ keeps dovish policy, stays mum on pivot 

The yen was the worst performer in Asia for the day, down 0.6% after the BOJ held interest rates at negative levels and offered no cues on when it planned to begin tightening policy.

Still, the central bank warned that Japanese inflation was likely to remain sticky in the coming months- a trend that could see the bank come under increased pressure to tighten policy. 

While Governor Kazuo Ueda had offered some signals on potential policy tightening in 2024, he reiterated the need for ultra-loose policy in the near-term, citing increased economic risks to Japan. The BOJ echoed this stance on Tuesday. 

Still, the yen remained close to recent five-month highs against the dollar, having recovered sharply following dovish signals from the Fed last week.

Most Asian currencies, while softening slightly on Tuesday, were also sitting on strong gains against the dollar over the past week, after the Fed said it was done raising interest rates and will consider rate cuts in the coming year. 

The Australian dollar rose 0.2%, remaining close to five-month highs. The minutes of the Reserve Bank’s December meeting showed that while the bank had considered hiking rates, it kept them on hold in anticipation of more economic cues. 

The Chinese yuan fell 0.1% before a People’s Bank of China decision on loan prime rates later this week. The central bank is widely expected to keep the rate at record lows, as it struggles to foster economic growth while supporting the yuan. 

Concerns over China still kept sentiment towards Asian markets skittish, following a string of dismal economic readings for November. 

The South Korean won lost 0.1%, while the Indian rupee was flat but traded above record lows hit last month. 

Dollar finds its footing as Fed officials downplay rate cut hopes

The dollar index and dollar index futures both traded flat in Asian trade on Tuesday, but had marked a strong rebound from four-month lows in the past two sessions.

A slew of Fed officials said that while the bank will trim rates in 2024, bets on an imminent pivot were unfounded.

Chicago Fed President Austan Goolsbee said the bank had not committed to cutting rates soon, joining several other officials in pushing back against expectations of an abrupt end to high interest rates. 

Still, Fed Fund futures prices showed a nearly 63% chance for a rate cut in March 2024.

Goldman Sachs analysts also said on Tuesday that the central bank will cut rates five times in 2024, with a bulk of the cuts biased towards the first half of the year. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.