SINGAPORE (Reuters) – The dollar hovered near 16-month highs versus a basket of its major rivals after gaining overnight as traders bet on the relative outperformance of the U.S. economy and continued rate increases by the Federal Reserve.
The Fed staying ahead of the curve on its tightening path would be further underscored by expectations the Bank of Japan would leave its easy policy intact when it reviews rates later in the day.
Dollar - Yen - Trade - Percent - Day
The dollar strengthened to a three-week high versus the Japanese yen trade at 113.21, having gained 0.6 percent the previous day.
The BOJ is expected to signal its readiness to maintain its massive stimulus program for the time being, as global trade frictions and financial market jitters cloud the economic outlook.
Fireworks - Today - BoJ - Meeting - Message
“We don’t expect any fireworks from today’s BoJ meeting. They are most likely to re-iterate the message that they are going to stay patient with respect to accommodative policy,” said Sim Moh Siong, currency strategist at Bank of Singapore.
“I still see the main driver for the dollar/yen to be U.S. 10 year bond yields and the overall level of risk aversion in the system which can be gauged by the VIX index.”
US - Treasury - Bond - Yields - Sessions
The U.S. 10-year treasury bond yields have been inching higher for the last three sessions and was last traded at 3.12 percent. This when compared with the 10-year Japanese government bond yield of 0.12 percent, highlights the gap in favor of the dollar.
The dollar index , a gauge of its value versus six major peers, kept its overnight...
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