Investing.com — Most Asian currencies moved little Monday, while the dollar stabilized as traders settled in for a series of central bank meetings this week, mainly the Federal Reserve and the Bank of Japan.
Lingering concerns about the war between Israel and Hamas continued to play a role, as Israel launched a large-scale ground attack on Gaza. But signs that the conflict would not escalate immediately provided some relief for risk-driven markets.
Trading in Asia firmed slightly, retaining most of last week’s gains, as markets largely remained worried about a move on Wednesday. The central bank will leave rates unchanged, but will likely signal higher rates for a longer period of time as it continues to move against overheated inflation.
Higher US yields bode poorly for Asian currencies as the gap between high-risk and low-risk yields narrows. U.S. Treasury yields also rose on Monday, staying within sight of recent peaks.
Most Asian currencies held a flat to low range as sentiment remained weak. It was one of the day’s few outliers, rising nearly 0.4% as data through September showed a stronger-than-expected increase.
This outcome takes into account higher inflation expectations and gives rise to expectations that the Reserve Bank of Australia will raise rates when it meets next week.
Japanese yen stable below 150, aggressive BOJ in focus
The index stabilized slightly on Monday, settling below the 150 level after falling to a one-year low last week.
The focus was squarely on Tuesday’s close, where the central bank is expected to announce further changes to its yield curve control policy as it grapples with high inflation and a severely weakened yen.
Recent data showed a growing rebound in Japanese, which traders bet could prompt the BOJ to scale back its ultra-loose policy. Analysts also see an end to the bank’s negative interest rate in 2024.
Any aggressive action from the BOJ is expected to benefit the yen, one of the worst performing Asian currencies this year. Markets also watched for possible Japanese government interventions in the currency markets to support the yen.
Among other things, currencies were flat on Monday, while markets waited for the key on Tuesday. The figures are expected to show some improvement in Asia’s largest economy.
Stocks rose 0.2%, following a decline in oil prices, while the and stock markets also added 0.2% each.
In addition to the Fed and the BOJ, the ECB will also decide on interest rates this week.
