The yen was up 0.1% at 159.78, rebounding from its weakest levels in two years as Japanese Finance Minister Satsuki Katayama said authorities were on high alert for currency market volatility and the recent move was partly driven by speculators.
The Bank of Japan’s decision comes in the middle of a key week of key central bank meetings scheduled for later in the day, as traders look for signs of how policymakers will respond to shocks in energy prices.
The Federal Open Market Committee held interest rates on Wednesday and forecast higher inflation, steady unemployment and a single reduction in borrowing costs this year, a path Fed Chairman Jerome Powell said was subject to unusually high uncertainty as policymakers took stock of the impact of the US-Israeli strike on Iran.
“Chair Powell has been extremely vague about how the FOMC will respond to the war, repeatedly refusing to speculate on whether inflation or employment effects will dominate,” said Steve Englander, global head of G10 FX research at Standard Chartered in New York.
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“Part of the disappointment was Powell’s expressed frustration at the slow pace of disinflation, which most clearly cut policy rates on inflation approaching the target.”
The dollar clung to gains on Thursday as traders assessed the Federal Reserve’s decision to keep rates on hold against a backdrop of accelerating US inflation amid raging Middle East conflict and rising oil prices.
The US dollar index, which measures the greenback’s strength against a basket of six currencies, fell 0.1% to 100.11, near its highest level in four months, as traders bet the Fed will cut interest rates later this year.
The Fed’s decision showed data released on Wednesday showed the largest rise in producer prices for seven months during February, driven by higher costs for a range of services and goods ahead of the outbreak of war in the Middle East.
Financial markets are fully pricing in the US central bank’s April 29 meeting, with expectations for further easing pushed back to 2027. According to CME Group’s FedWatch tool, Fed funds futures suggest the odds of a rate cut in December are slightly better than a coin toss.
In Asia, market attention turns to the Bank of Japan, which is expected to hold interest rates steady when it meets later on Thursday, awaiting further clarity on how the Middle East conflict could affect growth and inflation trends in the import-dependent economy.
BOJ Governor Kazuo Ueda is still likely to keep the BOJ’s pledge to keep raising borrowing costs low but give few hints on the timing of the next rate-hike, which depends a lot on how long the battle lasts, analysts said.
Oil prices rose further with Brent crude futures up 4.2% at $111.87 a barrel after Iran attacked several energy facilities across the Middle East following a strike on its South Pars gas field.
The euro rose 0.1% to $1.1469, while the British pound gained 0.1% to $1.3273. Both the European Central Bank and the Bank of England are expected to keep rates on hold when they meet later Thursday to announce policy decisions.
The Australian dollar rose 0.2% to $0.7040, after February data showed unemployment rose to 4.3%, slightly above market estimates, and the Reserve Bank of Australia warned on Thursday that conflict in the Middle East posed a material risk to the domestic economy.
The New Zealand dollar rose 0.3% to $0.5816 after official data released earlier showed gross domestic product rose 0.2% in the fourth quarter from the previous quarter, but was weaker than analyst expectations and central bank forecasts. The Reserve Bank of New Zealand also said it intends to change its approach to open market operations.
Against the Chinese yuan, the US dollar was down 0.1% at 6.8965 yuan in offshore trade.
Bitcoin was flat at $71,242.37, while Ether was up 0.6% at $2,200.44.
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