Yuan holds steady after BOJ decision; focus shifts to Fed
SHANGHAI: China's yuan held steady against the US dollar on Tuesday, as the Bank of Japan kept policy rates on hold, while market focus shifted to the US Federal Reserve rate decision for clues on the policy outlook in the world's biggest economy.
The BOJ kept interest rates steady on Tuesday and decided to decelerate the pace of its balance sheet drawdown next year, signaling its preference to move cautiously in removing remnants of its massive, decade-long stimulus.
The onshore and offshore yuan barely reacted to the rate decision amid the backdrop of fighting between Israel and Iran, and fears of a broader regional conflict. "The yen's impact on the yuan has recently been indirect, largely channeled through movements in the US dollar index," said Ding Liang, a strategist at research firm Macro Hive.
The US dollar index, which measures the currency against six major rivals, rose 0.063 per cent to 98.24. The spot yuan opened at 7.1799 per dollar and was last trading at 7.1815 as of 0235 GMT, 3 pips firmer than the previous late session close and 0.1 per cent weaker than the midpoint.
All eyes are on the Federal Reserve's policy decision due Wednesday, with markets widely expecting the central bank to leave interest rates unchanged. Investors will be watching closely for any signals on the future path of monetary policy.
Prior to the market opening, the People's Bank of China set the midpoint rate at 7.1746 per dollar, its strongest since March 19 and 74 pips firmer than a Reuters' estimate. The spot yuan is allowed to trade 2 per cent either side of the fixed midpoint each day.
Front-loading of policy support measures have managed to hold up domestic activities leading to a boost in retail sales in May, Citi analysts said. The analysts said they don't expect any major policy changes at the July Politburo meeting. The offshore yuan traded at 7.1814 yuan per dollar, up about 0.03 per cent in Asian trade.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 hours ago
- New Straits Times
European shares slide as Israel-Iran conflict shows no sign of cooling
LONDON: European shares opened lower on Tuesday as the air war between Iran and Israel entered its fifth day, raising the risk of further unrest and pushing investors to safer assets. The pan-European STOXX 600 index was down 0.8 per cent at 542.38 points by 0710 GMT. It had snapped a five-session losing streak on Monday. The Israel-Iran conflict extended to a fifth straight day on Tuesday, with US President Donald Trump urging Iranians to evacuate Tehran, citing what he said was the country's rejection of a deal to curb nuclear weapons development. Trump had departed early from the Group of Seven summit in Canada but clarified that this it has "nothing to do" with working on a ceasefire leaving investors with no clarity on the conflict. Oil prices ticked higher following the heightened tensions, before retreating. Energy shares outperformed peers, up 0.3 per cent. All other sectors were in the red, with telecom firms leading declines at 1.4 per cent. Among stocks, London's Ashtead was among the top percentage gainers despite forecasting a slowdown in rental revenue growth.
Free Malaysia Today
2 hours ago
- Free Malaysia Today
Yen slides ahead of Bank of Japan policy decision
The Bank of Japan is expected to keep its main interest rate around 0.5%. (Reuters pic) TOKYO : The yen fell against the dollar ahead of a Bank of Japan (BOJ) decision today, with officials expected to hold interest rates steady but tweak their bond purchase policy. The central bank last year said it would scale down its huge purchases of government bonds – part of attempts to move away from a quantitative easing programme designed to banish stagnation and harmful deflation. It is now considering slowing the pace of these cutbacks, analysts and media reports said. 'Slowing the bond taper will help keep interest rates lower than otherwise, providing support to the economy amid heightened trade uncertainty,' Carol Kong, an analyst at the Commonwealth Bank of Australia, told AFP. 'Speculation of such a move intensified after a surge in the 'super long' Japanese Government Bond (JGB) yields in recent months,' she explained. The dollar surged higher than ¥145 in morning trade, compared with levels of around ¥144.30 yesterday. 'The recent softening of the yen could already partly reflect expectations for a cautious policy update from the BoJ… alongside negative spill-overs for Japan from the Middle East conflict,' said Lee Hardman of MUFG. The BoJ is expected to keep its main interest rate around 0.5%, lower than the US Federal Reserve's 4.25%-4.5%. Bank officials began lifting borrowing costs last year after nearly two decades of ultra-loose monetary policies aimed at kick-starting torpid economic growth in Japan. 'The BoJ will likely hold off on rate hikes until there is further clarity on US trade policy,' Kong said. Japan, a key US ally and its biggest investor, is subject to the same 10% baseline tariffs imposed on most nations plus steeper levies on cars, steel and aluminium. Trump also announced an additional 24% 'reciprocal' tariff on Japan in early April but later paused it along with similar measures on other countries. Prime Minister Shigeru Ishiba said yesterday there had been no breakthrough on a US trade deal after talks with President Donald Trump on the sidelines of the G7 summit in Canada. 'We still believe the Bank may hike rates in the second half of the year as it remains committed to normalising monetary policy,' said Katsutoshi Inadome of SuMi TRUST. 'We expect that domestic demand will remain solid and that there is a chance economic conditions will improve to the point where the BoJ can consider interest hikes,' he said.
Free Malaysia Today
2 hours ago
- Free Malaysia Today
Dollar steadies, yen choppy after BOJ stands pat on rates
The US dollar held to its gains in a general risk-off move as tensions in the Middle East weighed on sentiment. (Freepik pic) SINGAPORE : The US dollar firmed slightly today while the yen swung between losses and gains after the Bank of Japan (BOJ) left rates unchanged and decided to slow the pace of its balance sheet drawdown next year. The BOJ maintained short-term interest rates at 0.5% as expected at the conclusion of its two-day monetary policy meeting and laid out a new bond taper plan for fiscal 2026. The yen was choppy in the aftermath and was last slightly higher at 144.70 per dollar, with the focus now on comments at a post-meeting press conference by BOJ governor Kazuo Ueda later in the day. 'Attention will be on what governor Ueda says at his press conference. 'Markets will be particularly interested in how he categorises the inflation trends in Japan, especially in the context of heightened trade tensions,' said Carol Kong, a currency strategist at Commonwealth Bank of Australia. Japanese Prime Minister Shigeru Ishiba and US President Donald Trump did not reach a tariff agreement. In the broader market, the dollar held to its gains in a general risk-off move as tensions in the Middle East weighed on sentiment. The White House said yesterday that Donald Trump is leaving the Group of Seven summit in Canada a day early due to the situation in the Middle East, as the president has requested that the national security council be prepared in the situation room. Trump had earlier urged everyone to immediately evacuate Tehran, and reiterated that Iran should have signed a nuclear deal with the United States. The risk-sensitive Australian dollar was up 0.09% at US$0.6530, after falling earlier in the session. The New Zealand dollar traded 0.14% higher at US$0.6068. Against a basket of currencies, the dollar was steady at 98.15. 'The developments out of the Middle East over the past few days threaten regional stability gravely,' said analysts at DBS in a note. 'The long-simmering Israel-Iran conflict reaching a major chapter should add to market stress, but so far, the view is global spillover risks are manageable,' analysts said. Still, overall moves in the currency market were largely subdued, as investors also looked ahead to a slew of central bank decisions later in the week to guide the next move in markets. The Federal Reserve's policy decision tomorrow takes centre stage. Expectations are for the central bank to keep rates on hold, though focus will be on any guidance regarding the rate outlook. 'Markets anticipate two Fed rate cuts this year, but I expect zero,' said Ronald Temple, chief market strategist at Lazard. 'Investors will carefully examine the Summary of Economic Projections for signs of potential policy easing with the dot plot and macro forecasts being focal points. 'I expect another shift in the dot plot toward fewer rate cuts,' Temple said. Elsewhere, the euro was little changed at US$1.1561, while sterling last bought US$1.3574. Trump signed an agreement yesterday formally lowering some tariffs on imports from Britain as the countries continue working toward a formal trade deal.
