FX market outlook

FX market outlook

Dollar above 117 yen, euro under pressure below $1.04.

The Bank of Japan announced after a two-day meeting today that it kept its short-term rate target at minus 0.1% and its 10-year Japanese government bond yield target at around zero.

The yen was little changed after the news as the BOJ’s decision was expected but what was a positive surprise was the Bank upgraded its assessment of the economy. It was positive about the growth outlook and noted that the economy continued to recover moderately.

The dollar traded to a session high of 117.73 yen. The Japanese currency, which is perceived as a safe haven asset,  did not react much to geopolitical events that occurred overnight, where there were attacks in Germany and Turkey. Focus now turns to the BOJ Governor Kuroda’s press conference, which will give more insight into the Bank’s decision.

In Australia, the nation’s central bank published the minutes of its latest policy meeting at which the key cash rate was left unchanged at a 1.50% record low. There were no surprises in the minutes. The RBA stated that current policy was right for growth and inflation. It said the economy was weaker than previously forecast and the rising Australian dollar could pose a risk. It expects inflation to remain low for some time but the rise in commodities will be a positive for the economy.

The Australian dollar was softer today, touching a session low of $0.7239, down from levels above $0.73 on Monday.

The euro was weak against the greenback and consolidated losses after falling below the key $1.0400 level yesterday. The single currency touched as low as $1.0382 in Asia today.

Gold was steady for most of the session but turned lower to $1,134.54 an ounce by the end of the session.

Brent crude held above $54 a barrel while WTI oil traded close to the $53 a barrel level.