Following the Bank of Japan’s (BOJ) anticipated move to conclude its negative interest rate policy, the yen weakened, recording a drop of over 0.5% against the dollar, while the Australian dollar also saw a decline, falling more than 0.4% to $0.65325 after the Reserve Bank of Australia (RBA) opted to keep interest rates unchanged. This decision by the BOJ marks a significant pivot from its eight-year-long unconventional monetary policy, leading to a notable reaction in currency markets. The euro and sterling capitalized on the yen’s decline, with respective gains of 0.44% and 0.32%, reaching 190.52 yen against the sterling.
The RBA’s decision to hold rates steady amidst high economic uncertainty contributed to the Australian dollar’s further decline, underscoring the cautious stance of global central banks. The New Zealand dollar and sterling also experienced downturns against a strengthening dollar, with the former hitting a one-month low and the latter a two-week low. This comes as recent U.S. economic data points to persistent inflation, prompting a reassessment of the Federal Reserve’s rate cut expectations. With the Fed’s policy decision on the horizon, the financial community is keenly awaiting any signals on the commencement of the rate easing cycle, with current forecasts suggesting three rate cuts in 2024. The dollar’s ascent to a two-week peak against a basket of currencies underscores the ongoing adjustments in global financial markets in response to central bank actions and economic indicators.
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