Dollar slips ahead of US, Japan central bank meetings
Dealers are hoping the Fed will provide clues about the state of the world’s biggest economy as it wraps up its two-day meeting Wednesday, while first quarter growth figrues are also due for release this week.
In December, the US central bank raised interest rates for the first time in more than nine years but after the turmoil that hammered world markets in January-February, it has lowered its expectations for more increases in 2016.
“The tone of the (policy committee) statement is expected to reflect an open-minded Fed about the timing of the next tightening,” Bank of New Zealand currency strategist Jason Wong said in a commentary.
“It’s unlikely to want to close the door on a possible June tightening, so the market will be left with monitoring the data and market conditions.”
On Tuesday, the greenback weakened to 110.98 yen from 111.21 yen on Monday in New York.
The euro edged down to $1.1261 from $1.1266 in US trade, while it dipped to 124.97 yen from 125.30 yen.
Emerging market currencies retreated against the greenback as dealers looked for safer investments, with the Malaysian ringgit falling 0.8 percent and Indonesia’s rupiah down 0.2 percent.
The South Korean won, Thai baht and Singapore’s dollar also traded lower.
“Risk aversion has returned,” Philip Wee, a Singapore-based senior currency economist at DBS Group.
On Thursday, the BoJ wraps up its latest policy meeting, with dealers expecting fresh stimulus measures following this month’s deadly earthquakes that led to factory closures, threatening Japan’s already fragile economy.
The central bank shocked markets in January after it adopted a negative rate policy, effectively charging banks to store excess reserves in its vaults.
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