Many Asian currencies remained stable on Monday, while the dollar held steady near its recent highs as attention shifted to upcoming central bank meetings led by the Bank of Japan and the Federal Reserve.
Last week's strong U.S. inflation figures kept traders cautious about any potential hawkish signals from the Fed. Meanwhile, positive wage data and persistent inflation led to speculation about whether the BOJ would adjust its ultra-loose monetary policies this week.
The USDJPY pair showed little movement on Monday, following a volatile week driven by speculation regarding changes to the BOJ's negative interest rate and yield curve control policies. The BOJ began its two-day meeting on Monday, with a highly anticipated decision expected on Tuesday.
Although recent data indicated rising wages and sticky inflation in Japan, analysts were divided on whether the BOJ would raise rates in March or April, with April being slightly favored. The expected rate hike would be by 20 basis points to 0.1% from the current negative 0.1%.
Despite the potential positive impact of rate hikes on the yen, uncertainty about the timing of such moves led to volatile fluctuations in the USDJPY pair in recent weeks, with the currency pair hovering around 149 on Monday.
In Asian trading on Monday, the dollar index and dollar index futures showed little movement, stabilizing near their two-week highs as all eyes turned to the conclusion of the Fed's two-day meeting on Wednesday.
While the Fed is expected to maintain interest rates, markets are eager for any hints about future rate cuts, especially given the recent data showing higher-than-expected inflation in February. A more hawkish stance from the central bank could negatively impact Asian markets.
With several other regional central bank decisions expected later in the week, most regional currencies remained largely unchanged on Monday.
The Australian dollar rose slightly ahead of the Reserve Bank of Australia's rate decision on Tuesday, with expectations that rates will remain unchanged amid persistent inflation concerns.
The Chinese yuan remained stable on Monday, with the USDCNY pair hovering around 7.1973, as the People’s Bank of China is anticipated to leave its loan prime rate unchanged this week.
Recent data from China showed mixed signals, with industrial production exceeding expectations while retail sales fell short and unemployment unexpectedly rose in the first two months of 2024.
The South Korean won and the Singapore dollar showed minimal movement against the dollar on Monday, while the Indian rupee strengthened slightly amid indications of continued support from the Reserve Bank of India, with USDINR dipping 0.1% to 82.841.
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