Dollar slips ahead of busy week for central banks


The U.S. dollar weakened against a basket of its major rivals on Monday, as traders prepared for a week filled with monetary-policy updates from Japan, the U.S. and the U.K.

The ICE U.S. Dollar Index

DXY, -0.39%

 was down 0.4% at 94.284, while the broader WSJ Dollar Index

BUXX, -0.28%

 was down 0.3% at 88.05.

This gave the greenback’s main rival, the euro

EURUSD, +0.5491%

room to rally to $1.1712 compared with $1.1656 late Friday.

The Bank of Japan policy update due early Tuesday Eastern time, followed by the Federal Reserve’s update on Wednesday and the Bank of England early Thursday Eastern Time.

While the Fed on Wednesday is expected to something of a nonevent, Japan’s central bank could lower its inflation target to 1.5%, market participants speculated. Inflation targets—with 2% as the “gold standard”—has been a much discussed topic among central bankers and investors who questioned the weight attached to the level.

There is also speculation that the Bank of Japan could change the yield target for it’s 10-year yield

TMBMKJP-10Y, +2.08%

Read: Here’s why investors will be keeping close watch on the Bank of Japan

“Even if they tell us they are talking about making changes that is likely to be enough for the market to try and take the yen stronger,” said Brad Bechtel, managing director in FX at Jefferies.

But “while I do think the knee jerk will be yen stronger, dollar-yen lower, I think this is such a consensus trade now that it will be hard for the pair to run for very long,” he added.

The Japanese yen

USDJPY, -0.07%

 was slightly weaker versus the greenback on Monday, with one dollar buying ¥110.96, up from ¥111.04 late Friday in New York.

The Bank of England policy meeting will also be closely watched as “traders will see how the U.K. central bank will try to balance its desire to return to normalization with the looming prospect of no deal Brexit that could wreak economic havoc across multiple industries,” said Boris Schlossberg, managing director of FX strategy.

The central bank led by Gov. Mark Carney is expected to lift rates by 25 basis points, or a quarter of a percentage point, to 0.75%.

The British pound

GBPUSD, +0.3205%

 last fetched $1.3148, up slightly from $1.3104 late Friday.

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Source : MTV