In Asian trading on Monday, the US dollar barely moved, even sterling rose, but the yen fell as a Japanese holiday and a slew of upcoming central bank meetings sucked the air out of the markets.
The Bank of Japan meeting on Friday will be the highlight of the week in Asia, after Bank Governor Kazuo Ueda sparked speculation of an imminent departure from ultra-soft policy.
This has highlighted the Japanese central bank in a week packed with central bank meetings, with a hawkish pause expected from the US Federal Reserve on Wednesday and the Bank of England possibly raising rates for the last time on Thursday.
The yen was unchanged against the US dollar at between 147.63 and 147.88 per dollar, while markets in Japan were closed due to a public holiday. The yen fell 1.3% in the days following Ueda’s announcement that he would soon move away from negative rates, with losses for 2023 exceeding 11%.
Economists at Commonwealth Bank of Australia expect yen exchange rate volatility ahead of the policy meeting and believe investors may have misinterpreted Ueda’s comments. Recent weakness in Japanese wages and possible prices could also soften and push the BoJ away from its inflation target, so the case for the BoJ to tighten policy is not yet strong.