# Dollar drifts as traders weigh rate path; yen fragile Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-06-19 Category: Uncategorized Category URL: https://financedigest.com/category/uncategorized Meta Title: Dollar Drifts as Traders Weigh Rate Path; Yen Fragile Meta Description: Get the latest insights on the fluctuating dollar and fragile yen following central bank meetings. Stay informed with expert analysis from Ankur Banerjee. URL: https://financedigest.com/dollar-drifts-as-traders-weigh-rate-path-yen-fragilehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-06-19t022736z1lynxmpej5i01grtroptp4global-forex-1736813865274-compressed.jpg) # Dollar drifts as traders weigh rate path; yen fragile By Ankur Banerjee SINGAPORE (Reuters) – The U.S. [dollar was tentative on Monday as investors tried to assess the monetary policy path](https://www.financedigest.com/dollar-tentative-as-investors-assess-rate-hike-path.html "Dollar tentative as investors assess rate-hike path") ahead after a raft of central bank meetings last week, while the yen was fragile in the wake of the Bank of Japan sticking to its ultra-easy policy. The dollar index, which measures the U.S. currency against six major rivals, rose 0.049% to 102.33, not far from a one-month low of 102 it touched on Friday. U.S. [markets are closed](https://www.financedigest.com/sodium-cyanide-market-to-close-in-on-us-3-bn-valuation-by-2030.html "Sodium Cyanide Market to Close in on US$ 3 Bn Valuation by 2030") on Monday for a holiday. In an action-packed week of central bank decisions, the Federal Reserve left interest [rates unchanged on Wednesday but hinted that further hikes](https://www.financedigest.com/ecb-to-go-big-again-on-oct-27-with-75-bps-rate-hike-reuters-poll.html "ECB to go big again on Oct. 27 with 75 bps rate hike: Reuters poll") were on the way to tame inflation. The European Central Bank raised interest [rates by 25 basis points on Thursday and left the door open to more hikes](https://www.financedigest.com/fed-officials-still-leaning-to-75-basis-point-rate-hike-in-july.html "Fed officials still leaning to 75-basis-point rate hike in July"), with the Bank of Japan rounding off the week by standing pat on its ultra-easy policy. The [Fed’s hawkish](https://www.financedigest.com/world-equities-fall-u-s-treasury-yields-rise-after-hawkish-fed.html "World equities fall, U.S. Treasury yields rise after hawkish Fed") hold means that the bar to a hike next month is low,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York. Investors, though, expect the [central bank](https://www.financedigest.com/central-banks-opt-for-shock-and-awe-to-tame-inflation.html "Central banks opt for shock and awe to tame inflation") to be done with its tightening in July. [Markets are pricing](https://www.financedigest.com/west-drayton-proves-popular-alternative-with-those-priced-out-of-london-market.html "West Drayton Proves Popular Alternative With Those Priced Out Of London Market") in a 72% probability of the Fed hiking by 25 basis points next month, CME FedWatch tool showed, and stopping after that. The market, which had been [pricing in cuts](https://www.financedigest.com/british-supermarket-waitrose-cuts-prices-on-200-products.html "British supermarket Waitrose cuts prices on 200 products") this year until late May still needs to be convinced that the Fed will in fact deliver two more hikes this year,” Chandler said. [Investor focus this week will be on Fed Chair Jerome Powell’s](https://www.financedigest.com/dollar-edges-lower-as-investors-wait-on-feds-powell.html "Dollar edges lower as investors wait on Fed’s Powell") testimony later this week to Congress. Congressional testimony [next week](https://www.financedigest.com/hungary-cenbank-seen-hiking-100-bps-to-11-75-next-week-as-inflation-surges.html "Hungary cenbank seen hiking 100 bps to 11.75% next week as inflation surges") gives Chair Powell a second chance to push a more hawkish message,” Citi strategists said in a note on Friday. [Fed officials](https://www.financedigest.com/key-fed-official-sees-rates-liftoff-in-2023-as-policy-debate-heats-up.html "Key Fed official sees rates liftoff in 2023 as policy debate heats up") have also struck a hawkish tone since the meeting. Citi said sustained strength in the economy has raised optimism around a [‘soft landing’](https://www.financedigest.com/feds-job-friendly-soft-landing-hinges-on-history-not-repeating.html "Fed’s job-friendly ‘soft landing’ hinges on history not repeating") where inflation falls without a recession. However, persistently strong core inflation [keeps](https://www.financedigest.com/bank-of-england-calls-for-wage-restraint-to-keep-grip-on-inflation.html "Bank of England calls for wage restraint to keep grip on inflation") us in the camp of those who think the most likely way inflation returns to target is through a significant downturn in growth. ## YEN SLIDES As widely expected, the BOJ on Friday maintained its -0.1% short-term rate target and a 0% cap on the 10-year [bond yield](https://www.financedigest.com/german-bond-yields-at-new-highs-after-stronger-than-expected-pmis.html "German bond yields at new highs after stronger-than-expected PMIs") set under its yield curve control (YCC) policy, pushing the yen broadly lower. The BOJ believes Japan’s surge in inflation may not last without monetary policy staying loose,” said Mansoor Mohi-uddin, [chief economist](https://www.financedigest.com/ecb-should-raise-rates-at-steady-pace-chief-economist-says.html "ECB should raise rates at steady pace, chief economist says") at Bank of Singapore. We [expect the BOJ will lift or end its 10Y yield cap in 2023 as inflation](https://www.financedigest.com/u-s-consumers-inflation-expectations-highest-in-8-years-ny-fed-says.html "U.S. consumers’ inflation expectations highest in 8 years, NY Fed says") firms. But officials will keep the deposit [rate negative](https://www.financedigest.com/analysis-europe-says-goodbye-to-negative-rates-or-just-au-revoir.html "Analysis-Europe says goodbye to negative rates – or just ‘au revoir’?") to spur growth further. On Monday, the yen touched a [near seven-month low of 141.98 per dollar](https://www.financedigest.com/oil-prices-ease-to-trade-near-2-month-lows-on-china-demand-fears-dollar-strength.html "Oil prices ease to trade near 2-month lows on China demand fears, dollar strength"), having slid 1% on Friday. The yen also touched a [fresh 15-year low](https://www.financedigest.com/putin-speech-sends-sterling-to-fresh-37-year-low-ahead-of-fed-boe-meetings.html "Putin speech sends sterling to fresh 37-year low ahead of Fed, BoE meetings") against the euro of 155.32. Meanwhile, the euro was up 0.01% to $1.0934, hovering near a one-month peak. Sterling was last at $1.2817, flat on the day. The Australian dollar fell 0.32% to $0.686, while the kiwi eased 0.26% to $0.622. (Reporting by Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---