Investing.com– The Japanese yen gained sharply on Thursday as the U.S. dollar fell to a three-week low, with investors turning cautious ahead of a series of central bank meetings next week.
The US Dollar Index edged down 0.3% to 101.49 by 03:11 ET (07:11 GMT) — reaching its lowest since October 1.
The dollar’s recent retreat has been supported by lower U.S. Treasury yields and gains in other major currencies, although volatile oil prices and geopolitical tensions have added to uncertainty over inflation and the global monetary policy outlook.
Yen rallies, traders eye BOJ meeting due next week
The Japanese yen’s USD/JPY pair fell 0.8% to below 157 yen, as a weaker dollar and the threat of currency intervention supported the currency.
The focus is now on the Federal Reserve, the Bank of Japan and the European Central Bank, which are scheduled to announce policy decisions between October 28 and 30.
Investors are watching for updated inflation forecasts and comments from BOJ Governor Kazuo Ueda for clues on the timing of the next rate increase.
The Chinese yuan’s onshore USD/CNY and offshore USD/CNH pairs traded largely unchanged, remaining near four-year lows.
The South Korean won’s USD/KRW fell 0.4%. The Bank of Korea kept its benchmark interest rate unchanged at 3.00%, as expected, after consecutive quarter-point increases in July and August.
The unanimous decision reflected a pause to assess the effects of previous tightening, even as stronger exports and persistent inflation pressures kept further rate increases on the table.
Expectations that major policymakers will keep interest rates unchanged while signalling a willingness to tighten further have limited appetite for aggressive currency trades.
Fed hold expected; RBI retreats after sharp rally
Markets widely expect the Fed to hold rates at 3.75%-4.00% on October 28, while investors will look for signals on whether policymakers could resume tightening later this year.
The Indian rupee also remained in focus after a sustained rally supported by Reserve Bank of India measures aimed at curbing speculative dollar demand.
The currency had strengthened for nine consecutive sessions through Wednesday.
The USD/INR pair jumped 0.7% to 95.13 rupees on Thursday.
