In the dynamic world of Asian currency markets, most currencies remained relatively stable on Monday, while the dollar held steady near its recent highs. All eyes are now fixed on significant central bank meetings, particularly those led by the Bank of Japan (BOJ) and the Federal Reserve.

Last week’s robust U.S. inflation figures have put traders on alert for any hints of a hawkish stance from the Fed. Similarly, encouraging wage data and persistent inflation have fueled speculation about the BOJ’s potential decision to end its accommodative policies this week.

USDJPY Stability Amid BOJ Rate Hike Speculation

The Japanese yen experienced minimal movement on Monday, following a period of volatility sparked by rumors of the BOJ’s departure from its negative interest rate and yield curve control policies. The BOJ’s two-day meeting commenced on Monday, with a highly anticipated announcement scheduled for Tuesday.

The USDJPY pair, which had dropped to 146 against the dollar, saw fluctuations amidst reports of substantial wage hikes by Japanese labor unions. Despite indications of persistent inflation, analysts are divided on whether the BOJ will raise rates in March or April. The consensus leans slightly towards an April adjustment, with expectations of a 20 basis point increase to 0.1% from the current negative 0.1%.

While rate hikes typically favor the yen, uncertainty regarding the timing of such a move has led to volatile fluctuations in the USDJPY pair, which hovered around 149 on Monday.

Awaiting Fed Signals on Interest Rates

In Asian trading, both the dollar index and dollar index futures showed minimal movement, holding steady near their two-week highs. Attention is squarely focused on the conclusion of the Federal Reserve’s meeting on Wednesday.

While the Fed is expected to maintain current rates, market participants are eager for insights into potential interest rate cuts in 2024. However, recent inflation data, indicating higher-than-anticipated inflation in February, suggests the central bank might adopt a more hawkish stance than anticipated.

Regional Central Bank Decisions and Economic Indicators

The Reserve Bank of Australia’s rate decision on Tuesday is eagerly anticipated, with expectations of unchanged rates and limited signals regarding future policy adjustments, given prevailing inflationary pressures.

The Chinese yuan remained stable, with the USDCNY pair hovering around 7.1973, ahead of the People’s Bank of China’s expected decision to maintain its loan prime rate unchanged.

Mixed economic signals emerged from China, as industrial production exceeded expectations, but retail sales fell short and unemployment rose unexpectedly.

In South Korea, the won saw minimal movement, while the Singapore dollar remained flat following disappointing non-oil exports data.

Amid signs of continued support from the Reserve Bank of India, the Indian rupee saw slight strengthening against the dollar.

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