Yen Pulls Back as Markets Anticipate BOJ Hike, Dollar Edges Towards Two-Week Peak
The Japanese yen pulled back from its seven-month high on Tuesday as markets positioned for a Bank of Japan rate hike later this week. The US dollar, meanwhile, edged closer to a two-week peak ahead of the Federal Reserve's policy decision on Wednesday.
Currency markets are pricing in a 25-basis-point BOJ rate hike on Friday, which has kept the yen sensitive to signals on the pace of further tightening. DBS cautioned against chasing the dollar's pre-FOMC gains, noting that markets have already priced in a Fed hiking cycle and that two senior Fed officials had indicated a willingness to leave rates unchanged before the blackout period.
The oil price surge has added to pressure on currencies, particularly those of oil-importing economies. The Singapore dollar weakened slightly, while the Malaysian ringgit also declined. Indonesia's rupiah was under pressure due to changes in the country's finance ministry.