US Dollar Weak While Japanese Yen Makes Gains
US Dollar Weak: The US dollar continues to trade somewhat weak into Tuesday despite an uptick in US Treasury yields while the Japanese yen is making gains ahead of the upcoming BOJ policy meeting. At the time of writing, the US dollar index DXY is trading at around 95.39.
Two year US Treasury yields have surged past the 1% mark for the first time in almost two years while the five year US Treasury yields have climbed to the highest levels seen since January 2020. The rising expectation for the Fed to hike interest rates soon is sending US bond yields higher, although the dollar remains unaffected for now as markets have already priced in their effect on the currency.
Meanwhile, the weakness in the US dollar has helped EUR/USD register some gains and regain the 1.14 level. On the other hand, GBP/USD is trading mostly steady as both currencies rallied during the beginning of the year and await fresh catalysts to spark more volatility in the Cable.
US Dollar Weak:
Forex traders are likely to focus on the BOJ policy meeting in anticipation that the Japanese central bank could revise inflation estimates higher. Higher energy costs are bearing down on the world’s third largest economyl however, analysts expect the revises figures to remain well below the BOJ’s 2% target for inflation.
Later this week, traders will also focus on speeches from ECB President Christine Lagarde and other members as they share insights from December’s monetary policy meeting. Although no surprises are expected in these speeches, details on the economic impact of Omicron on Eurozone will be closely monitored.