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Dollar Steady, Markets Muted Ahead Of Fed And BoJ

Dollar Steady, Markets Muted Ahead Of Fed And BoJ

Major currencies were steady in today’s Asian session as trading turned cautious ahead of the FOMC meeting on Wednesday and the Bank of Japan meeting on Thursday. The US dollar was mostly flat against a basket of currencies but fell against the yen as investors speculated over whether the Bank of Japan will announce fresh stimulus measures at its April policy meeting.

The Bank of Japan will likely consider easing monetary policy further at its two-day meeting and may have to yet again lower its inflation outlook. Speculation last week that the bank may broaden its use of negative interest rates pushed the yen to a three-week low against the greenback yesterday, but the dollar fell back during US trading following weak US housing data.

Disappointing new home sales figures for March diminish any chances of a Fed interest rate hike on Wednesday and puts into doubt the possibility of a June rate hike. Nevertheless, many Fed policymakers continue to suggest that US rates are likely to go up by more than the one increase implied by the futures markets.

The dollar slipped to 110.78 yen in late Asian session on Tuesday, coming off from Monday’s high of 111.86 yen.

Against other currencies, the dollar was trading near yesterday’s lows versus the euro and the pound. The euro was slightly below Monday’s peak of 1.1278 dollars to trade at 1.1258 dollars in late Asian trading today, while the pound was testing the 1.45 level, having touched a six-week high of 1.4519 dollars yesterday.

The pound has rallied sharply since the beginning of April following signs of growing support for Britain to stay in the European Union. Recent intervention from senior figures such as US President Barack Obama who stated his strong opposition to a UK exit from the EU have added fresh impetus to the ‘remain’ campaign.

Sterling’s rally has also been extended to the euro as the single currency fell to a six-week low of 0.7750 pounds yesterday.

In commodities, crude oil pulled back from yesterday’s highs when prices rose on the back of a weaker dollar. WTI oil futures were last down 0.1% at $42.59 a barrel.

Looking ahead to the rest of the day, it will be fairly quiet in the European session with no major data expected. However, in the US session, durable goods orders for March and the April consumer confidence index will be watched closely.

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