Dollar Steady as Yen Soars Amid Expectations of Faster Rate Hikes
The US dollar remained steady on Monday as investors awaited key monetary policy decisions from major central banks. The yen, however, continued its upward trend and approached a seven-month high, with speculators turning to a net long position on the currency for the first time since February.
Market participants are closely watching the Federal Reserve's decision this week, which is expected to be a 25 basis point rate hike. The European Central Bank raised rates last week and warned of further hikes, setting the stage for the Fed policy decision on Wednesday.
The dollar index was steady at 99.15 after two straight weeks of meager declines, despite rising yields in the US Treasury market. Analysts at ING noted that a rate hike would be beneficial for the dollar, as it would back up the Fed's monetary policy credibility and take some steam out of the debasement trade.
The yen's strength is attributed to expectations that the Bank of Japan will deliver faster rate hikes, with analysts at MUFG warning that not putting another rate hike on the table risks a knee-jerk dollar/yen rally back to 157-160. The BOJ is expected to announce its decision on Friday.