Asia FX muted before more economic cues; Yen firms with BOJ on tap By


© Reuters.– Most Asian currencies moved little on Monday, while the dollar ticked lower before a slew of key economic cues due this week, with the Japanese yen firming from near two-month lows in anticipation of a Bank of Japan meeting.

Concerns over China also kept sentiment towards Asian markets largely muted, after the People’s Bank of China held its benchmark at record lows earlier in the session. The central bank has limited headroom to loosen policy further, as it struggles to strike a balance between supporting an economic recovery and preventing more yuan weakness.

The moved little in onshore trade, while the crossed the 7.2 level to the dollar.

The dollar was hit with some profit-taking after a strong start to the year, with the outlook for the greenback looking robust as traders began pricing in a greater possibility of higher-for-longer U.S. interest rates. This notion weighed on most Asian currencies over the past few weeks.

Japanese yen rises, BOJ set to maintain ultra-dovish policy

The was among the worst-hit by expectations of high U.S. rates, but saw some strength on Monday, rising 0.2% from its weakest levels since late-November.

Focus was chiefly on the conclusion of a on Tuesday, where the central bank is widely expected to maintain negative interest rates and its yield curve control mechanisms.

Analysts expect , especially amid increased uncertainty over the Japanese economy after a devastating earthquake at the beginning of the year.

Softening inflation and sluggish wage growth is also expected to put little pressure on the BOJ to consider tightening policy.

Beyond the BOJ meeting, focus this week is also on for January, which is expected to reflect any inflationary impacts from the new year earthquake.

Broader Asian currencies were muted as they nursed losses from a weak start to the year. The steadied after sinking to a two-month low, while the lost 0.2% and remained in sight of a near three-month low. South Korean for the fourth quarter is also due this Thursday.

The steadied near two-month lows ahead of key later this week.

The moved little, with local markets closed for a special holiday to mark the inauguration of a controversial temple in North India. But traders remained on edge over any potential communal violence rising from the inauguration, given that the topic is a major point of contention for Hindu-Muslim relations.

Dollar edges lower before GDP, inflation data

The and both fell 0.1% in Asian trade, retreating further from recent one-month highs amid profit-taking.

The showed that markets were now pricing in a greater chance for no changes to U.S. interest rates in March- a drastic reversal from earlier expectations for a cut. Such a scenario bodes well for the dollar.

Focus this week is on more cues from the world’s largest economy, particularly on which is expected to show cooling growth.

More cues on inflation are also due this week with data- which is the Fed’s preferred inflation gauge- due this Friday. Any signs of sticky inflation give the bank more impetus to keep rates higher for longer.

The Fed is widely expected to when it meets next week.

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