A cooling in Middle East tensions, which had driven the dollar, gold and crude oil prices sharply higher on Friday and battered stock markets, also helped temper volatility
The euro and yen barely moved in Asian trading on Monday and the U.S. dollar was perched just off five-month highs after last week’s hectic policy and geopolitical developments.
Eyes are on the yen this week, with the Bank of Japan’s Friday policy review the notable item on the economic calendar.
The yen reached 154.70 per dollar, not far from last week’s 34-year low of 154.79 and close enough to the 155-level that is next on traders’ alerts for possible intervention by Japanese authorities.
The dollar’s trade-weighted index was above 106, but off five-month highs it hit last week after comments from Fed officials and a run of hotter-than-expected inflation data forced a paring back of rate cut expectations.
A cooling in Middle East tensions, which had driven the dollar, gold and crude oil prices sharply higher on Friday and battered stock markets, also helped temper volatility.
There will be a focus on the Bank of Japan meeting, but it is too soon for them to alter policy, and the market gives a change in rates no chance at all, according to Chris Weston, head of research at Pepperstone.
Referring to Japanese rates swaps, Weston said he sees “no change priced for this meeting” but a hike of 10 bps priced by July and 25 bps priced by December.
Besides the Bank of Japan meeting and a string of U.S. corporate earnings, investors will also get U.S. first-quarter GDP data on Thursday and the PCE index.
“Markets continue to unwind the flight to quality bond bid” given the de-escalation of the Middle East situation, according to Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities.
He added: This easing in tensions should bring the market’s focus back to the data.
The strong dollar prevailed at last week’s IMF/World Bank spring meetings in Washington too, and the US, Japan and South Korea issued a rare joint statement on the issue.
