CM – Currencies are waiting for the RBA to kick off big central bank week

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FILE PHOTO: This June 22, 2017 illustration photo shows a Japanese yen note in front of US dollar and British pound notes. REUTERS / Thomas White / Illustration

SINGAPORE: The dollar hovered below recent highs on Tuesday as traders waited for the Reserve Bank of Australia to chair a handful of central bank meetings to set interest rate outlook this week.

The The RBA, the Federal Reserve and the Bank of England all face rising inflation looming over the financial markets.

Australia will announce its monetary policy decision at 0330 GMT and a change in guidance is expected after the bank failed to defend its yield target as bonds were sold in the last few sessions.

The Fed will also start a two-day meeting later on Tuesday, at which it is expected to announce a tapering of its asset purchases, and the BOE will meet with the on Thursday Markets pricing in almost a small rate hike.

Movements in morning trading were minor, with the yen breaking at 114.11 per dollar was weaker and the greenback suffered a small overnight loss against the euro after US production data turned out to be weaker than expected.

The euro last bought $ 1.1599. The Aussie, who had been selling wildly in the domestic bond market for about a week, held up at $ 0.7521 despite volatility meters pointing to a bumpy week.

« The RBA meeting is widely reported as » live  » viewed after the RBA reached their target return of 0.1 percent on the 24th.

« We assume that the RBA will abandon the 0.1 percent target and at the same time reduce their forward guidance at the time of the first increase in the cash rate 2024, « she said. » In our view, if the RBA is not as restrictive as market prices, the AUD may fall, but it could find support near the technical level of $ 0.7379.  » Analysts said the Kiwi could track its Australian counterpart’s moves while the broader market could also be sensitive to the bank’s tone in fighting inflation as its US and UK rivals face similar dilemmas.

The kiwi was marginally weaker in morning trading at $ 0.7177. The pound sterling was also on the back foot at $ 1.3656, but moves were small before the Fed and the BOE.

« The elephant in the room is the headlines and underlying inflation which are higher than the (Fed) expected, « said Steve Englander, Head of G10 FX at Standard Chartered.

 » We expect the (Federal Open Market Committee) to declare that the Fed is ready to act decisively if inflation will not move towards the target level after the tapering ends, but it still expects inflation to decrease when supply constraints wear off. We believe investors will see this « as pushing the likely timing of the Fed’s rate hikes, » he said.

« We expect the currency markets to respond to the Fed’s implied threat of zero rate hikes , but discount inflation optimism. This adds up to a dollar-positive combination of higher real rates and increased risk-off positions. « 

The trader positioning also suggests betting on higher prices, with speculators crowding to short the yen.

« It’s a bet that interest rate trends will continue to move against the yen if they rise elsewhere, especially in the US, » said Societe Generale strategist Kit Juckes.

« In other words, there is one Majority that thinks the bond sell-off is not over yet. It’s also a bet that the risk mood will survive the experience. « 

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro Dollar

1.1598 US dollars 1.1607 US dollars -0.07 percent -5.07 percent 1.1607 1.1599

dollars / yen

114.0150 113.9900 0, 05 percent 10.42 percent 114.1250 114.0500

Euro / yen

132.23 132.29 -0.05 percent 4.18 percent 132.3900 132.2500

Dollars / Swiss

0.9095 0.9092 0.03 percent 2.80 percent 0.9096 0 .9093

pounds sterling / dollar

1.3650 1.3662 -0.08 percent -0.08 percent 1.3669 1.3652

dollars / Canadian

1.2375 1.2373 0.00% -2.83% 1.2376 1.2365

Aussie / Dollar

0.7520 0.7520 0.02% -2, 22% 0.7524 0.7515

New Zealand

dollars / dollars 0.7176 0.7186 -0.13 percent -0.06 percent 0.7185 0.7177

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