In the realm of currency markets, the dollar saw a slight decline on Monday as traders anticipated pivotal central bank meetings this week. All eyes are on the Bank of Japan (BOJ), which may be poised to terminate its longstanding negative interest rate policy, while investors eagerly await the Federal Reserve’s outlook on potential rate cuts.

Besides Japan and the United States, several other central banks, including those in Britain, Australia, and Switzerland, are scheduled to convene.

The dollar index, gauging the greenback against six other major currencies, showed a minor dip of 0.1% at 103.38. This year, it has appreciated roughly 2%, buoyed by the resilient performance of the U.S. economy, tempering expectations of swift and substantial rate cuts by the Fed in 2024.

Market sentiment has adjusted to anticipate approximately 73 basis points of cuts in 2024, down from about 140 bps at the year’s onset, with a probability of the inaugural rate reduction by June standing at around 60%, according to LSEG data.

All eyes are now on Wednesday’s Federal Reserve meeting, particularly whether policymakers will revise their projections for rate cuts, as outlined in the dot plots for the year. In December, the Fed forecasted a 75 basis point easing for 2024.

Against the Japanese yen, the dollar remained relatively unchanged at 149.07 yen per dollar.

The yen has witnessed considerable fluctuations in recent weeks, initially weakening to 150.88 against the dollar last month. However, it rebounded to a one-month high of 146.48 at the onset of March, propelled by robust economic indicators and mounting speculations regarding the BOJ’s inclination to terminate eight years of negative interest rates.

The expectation gained further traction with major Japanese firms announcing larger-than-anticipated pay hikes, reinforcing the likelihood of the central bank’s departure from ultra-loose monetary policies, potentially as early as its upcoming meeting on Tuesday.

The euro traded at $1.0896, while the pound hovered around $1.2745 ahead of the Bank of England’s meeting on Thursday, where rates are anticipated to remain at 5.25%. Both currencies showed modest gains against the dollar.

On Tuesday, Australia’s central bank is expected to maintain its current rates. The Australian dollar edged up by 0.18% to $0.6571.

Against the Swiss franc, the dollar remained steady at 0.8838 francs. Speculation looms over a potential interest rate cut by the Swiss National Bank on Thursday, given that inflation has long remained within its 0-2% target range.

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