The dollar hovered near multi-week lows versus major peers on Tuesday, weighed by subdued Treasury yields ahead of the Federal Reserve’s policy decision this week, while the yen hardly budged after the Bank of Japan kept its policy on hold.
The safe-haven greenback was also out of favor after world stocks started the week hitting a record high, amid increasing investor confidence in a rapid global recovery from the pandemic.
“The dollar doesn’t seem to have the strength it had earlier this year,” said Kyosuke Suzuki, chief of financial algotech company at Ryobi Systems. “It had been driven by various expectations, such as massive fiscal spending and speedy vaccinations in the States. Most of those appear to have been priced in.”
The dollar index, which tracks the U.S. currency against six peers, was little changed at 90.947 in mid-Asian session, after dipping to the lowest since March 3 overnight at 90.679.
The dollar added 0.1% to 108.18 yen, another haven currency, continuing its rise from the seven-week low of 107.48 reached Friday.
The yen showed a muted response after the Bank of Japan kept its monetary policy on hold as widely expected.
Additionally, no change to policy is expected when the Federal Open Market Committee ends its two-day meeting on Wednesday.
However, the market will pay close attention to comments from Fed Chairman Jerome Powell, who is likely to face questions over whether improving conditions warrant a withdrawal of monetary easing.
Most analysts though expect him to say such talk is premature, which could put downward pressure on Treasury yields and the dollar.
“The reflation trade is back on,” Gavin Friend, a strategist at National Australia Bank, said on a client podcast.
“Currencies outside of the dollar should be doing quite well anyway in that environment.”
The dollar has fallen nearly 3% since late March as U.S. Treasury yields traded in narrow ranges after retreating from a 14-month high of 1.7760%, slashing the currency’s yield appeal.
The benchmark 10-year Treasury yield was around 1.58% on Tuesday, tracking sideways since sliding to a one-month low of 1.528% in the middle of this month.
The euro slipped 0.1% to $1.2071, but remained close to the two-month high of $1.2117 reached Monday.
The commodity-linked Australian dollar, a barometer of risk appetite, eased 0.15% to $0.7789, after a 0.7% rally overnight that took it just shy of a five-week peak.
The offshore Chinese yuan retreated 0.1% after rising to a seven-week top of 6.4710 per dollar on Monday.
· German, French ministers back U.S. on 21% minimum corporate tax rate -Zeit
The finance ministers of France and Germany support the idea of a 21% minimum corporate tax rate, as suggested by the U.S. government, they said in a joint interview in Zeit Online on Tuesday.
· UK, in Addition to 14 Russians, Sanctions Citizens of South Africa, Sudan, Latin America
The UK, in addition to 14 Russian citizens, added citizens of South Africa, South Sudan and Latin America to the anti-corruption sanctions list, the UK Foreign Office said.
· China's industrial profits rise as upstream firms benefit from raw materials demand
Profits at China's industrial firms grew sharply in March from a low base a year ago, as demand for raw materials surged along with the economic recovery, but the pace of growth slowed, official data showed on Tuesday.
Profits rose to 711.18 billion yuan ($109.66 billion) in March, up 92.3% from a year ago, when the economy was hard hit by the COVID-19 crisis, data from the National Bureau of Statistics (NBS) showed.
· BOJ Governor Kuroda's comments at news conference
Japan’s central bank maintained its massive stimulus on Tuesday and projected inflation missing its 2% target for years to come, as fresh curbs to combat a spike in COVID-19 cases overshadow the boost to growth from solid global demand.
The Bank of Japan also warned of “high uncertainty” on how much the pandemic could drag on growth, signalling its readiness to keep its money spigot wide open for the foreseeable future.
Following are excerpts from BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
INFLATION TARGET
“According to our models, the cell phone fee cuts are likely to slash CPI by around 0.5% to 1.0% point. If not for this, our inflation forecast would have been higher.
ON THE BIG UPGRADE IN THE BOJ’S FISCAL 2022 FORECAST
“I don’t think it’s a particularly bullish forecast. The global economy has recovered quite clearly and world trade has rebounded to pre-pandemic levels. Japan’s exports and output continue to increase, helping lift corporate profits and capital expenditure.”
· Japan's defense ministry to open mass vaccination centre in Tokyo
Japan will open a mass vaccination centre in central Tokyo next month, officials said on Tuesday, part of the country’s bid to speed up its COVID-19 inoculation campaign as the Olympic Games looms.
Japan imposed a third state of emergency in its major population centres on Sunday, as the country attempts to combat a fourth wave of infections with just 87 days remaining until the Olympics is scheduled to begin.
· South Korea finance minister says taxing gains from cryptocurrency trading next year 'inevitable'
South Korea’s finance minister on Tuesday said the government will start taxing capital gains from trading of cryptocurrencies from next year as previously proposed.
· India’s new COVID-19 cases stay above 300,000, army called to help
Much needed medical supplies poured into India on Tuesday as overrun hospitals turned away patients due to a shortage of beds and oxygen supplies and a surge of infections pushed the COVID-19 death toll towards 200,000.
· Australia suspends flights from COVID-19 hotspot India
Australia on Tuesday suspended direct flights from India to prevent more virulent coronavirus variants entering the country following a surge in positive COVID-19 cases in the world's second-most populous nation.
· Myanmar's junta to 'positively' consider ASEAN suggestion on ending crisis
Myanmar's junta will give "careful consideration to constructive suggestions" from the Association of Southeast Asian Nations (ASEAN) on ways to resolve violent turmoil triggered by a Feb. 1 coup, the junta said.
· Oil rebounds, but gains limited amid demand concerns as India reels from COVID-19
Oil prices rebounded on Tuesday after falling in the previous session, but gains are likely to be capped amid growing concern about fuel demand in India, the world's third-biggest crude importer now slammed by spiralling new coronavirus cases.
Brent crude was up 40 cents, or 0.6%, at $66.05 a barrel by 0658 GMT, after dropping 0.7% on Monday. U.S. oil gained 40 cents, or 0.7%, to $62.31, having declined by 0.4% in the previous session.
India's woes comes as the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+, are set to discuss policy on production at a meeting this week.
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