Dollar Steady, Yen Rises After BOJ Decision; Ueda’s Remarks in Focus
The U.S. dollar held steady on Tuesday while the Japanese yen strengthened following the Bank of Japan’s (BOJ) latest policy announcement. Investors are now looking ahead to BOJ Governor Kazuo Ueda’s post-meeting press conference for insight into the future direction of interest rates.
As anticipated, the BOJ left its benchmark rate unchanged at the conclusion of its two-day meeting. It also announced plans to slow the pace of its balance sheet reduction starting next year, citing rising global uncertainties, including tensions in the Middle East and U.S. trade tariffs.
The yen initially fluctuated in the wake of the decision but ultimately firmed, last trading about 0.2% stronger at 144.50 per dollar.
“The BOJ still holds a massive amount of Japanese government bonds (JGBs), and that’s not decreasing significantly,” said Tohru Sasaki, chief strategist at Fukuoka Financial Group. “The slower pace of tapering likely reflects market volatility and the broader global economic outlook.”
Attention now shifts to Governor Ueda’s press briefing at 0630 GMT, where analysts expect him to address how the BOJ plans to navigate U.S. tariff threats and persistent domestic inflation.
“Markets will focus closely on Ueda’s language around inflation trends in Japan, especially amid rising trade tensions,” noted Carol Kong, currency strategist at Commonwealth Bank of Australia.
Trade negotiations between Japanese Prime Minister Shigeru Ishiba and U.S. President Donald Trump have yet to yield a formal agreement.
Dollar Holds Firm Amid Middle East Uncertainty
In broader currency markets, the dollar remained largely unchanged as risk appetite stayed subdued due to the ongoing conflict between Israel and Iran, now in its fifth day.
The White House confirmed that President Trump would leave the G7 summit in Canada a day early, citing the escalating Middle East situation. Trump has asked the National Security Council to remain on standby in the situation room.
Trump also reiterated warnings to Tehran, calling for a mass evacuation of the city and criticizing Iran’s decision not to sign a nuclear agreement with the U.S.
The Australian dollar recovered to trade up 0.13% at $0.6533 after earlier losses, while the New Zealand dollar gained 0.1% to $0.6065. The U.S. dollar index, which tracks the greenback against a basket of major currencies, was little changed at 98.13.
“The recent escalation in the Middle East poses a serious risk to regional stability,” analysts at DBS wrote. “Although the Israel-Iran conflict has reached a critical phase, markets appear to be viewing the global spillover risk as contained for now.”
Despite geopolitical tensions, currency market movements remained muted, with traders cautious ahead of several central bank meetings later this week.
Fed Decision in Spotlight
All eyes are now on the Federal Reserve, which is expected to hold interest rates steady at the conclusion of its policy meeting on Wednesday. Markets will be parsing Fed Chair Jerome Powell’s remarks and the updated Summary of Economic Projections for clues on whether any policy easing is likely this year.
“Markets are pricing in two rate cuts this year, but I expect none,” said Ronald Temple, chief market strategist at Lazard. “The dot plot and macroeconomic projections will be key in understanding how the Fed sees the path forward.”
Meanwhile, the euro was little changed at $1.1562, and the British pound last traded at $1.3576.
Trump also signed an agreement Monday to lower tariffs on certain imports from the U.K., as both countries continue working toward a comprehensive trade pact.
