LONDON/SINGAPORE—The euro got a lift on Tuesday, while the yen wallowed near 10-month lows against the dollar.
The euro rose by as much as 0.4 percent at one point on Monday to nudge at $1.07 and, by Tuesday, had retained most of those gains, trading flat on the day at $1.069.
However, this might not be enough to give the euro a more sustained boost, according to Lee Hardman, a strategist at MUFG.
The euro has been gradually losing steam over the last two months, since hitting a 15-month high, as the ECB has neared the end of its current cycle of rate rises. According to the most recent weekly data from the U.S. regulator, speculators have cut their bullish position in the euro to the smallest in 10 months.
This week brings a raft of central bank meetings, including those of the Federal Reserve, the Bank of Japan, the Bank of England, and the Swiss National Bank, among others, which kept currency volatility on the subdued side.
The yen is drawing a lot of focus at the moment, as the BOJ prepares to meet to discuss monetary policy on Friday.
It hit a 10-month low of 147.95 per dollar last week and by Tuesday, was not far off that mark, flat on the day at 147.63. The last time the yen was this weak was last autumn, when Japanese authorities intervened to prop it up.
Expectations are for the BOJ to maintain its policy of ultra-low interest rates and reassure markets that monetary stimulus will stay in place, at least for now, even as Governor Kazuo Ueda stoked speculation of an imminent move away from the central bank’s current policy stance.
“Our sense is that the BOJ needs ammunition in order to back itself in terms of any shift or even any guidance for (a) potential shift in policy over the coming six months to the next year,” said Rodrigo Catril, senior FX strategist at National Australia Bank (NAB).
“And we think that needs to happen with a set of new forecasts, and that’s why we don’t think that we will get many surprises on Friday.”
The U.S. dollar index hovered either side of unchanged at 105.04, holding near last week’s six-month peak.
Money markets expect the Fed to keep rates on hold at its upcoming meeting, according to the CME FedWatch tool, though focus will be on the central bank’s forward guidance.
“The market is fully pricing in a hold and this meeting was always likely to be a pass since the Fed skipped June, effectively moving to an every-other-meeting cadence,” said Erik Weisman, chief economist and portfolio manager at MFS Investment Management.
“The market will be looking for any hints that the Fed may be leaning towards another hike by year end or that a more persistent pause is in order.”
In other currencies, sterling was flat at $1.2384, ahead of an interest rate decision from the BoE on Thursday.
The Bank is expected to deliver another rate hike on Thursday, but this could be its last for now, as a cooling economy has policymakers unsettled.