By Gregor Stuart Hunter
SINGAPORE, April 28 (Reuters) – The yen firmed on Tuesday after the Bank of Japan held interest rates steady in a split vote, the first decision in a busy week for major central banks including the Federal Reserve as the Iran war loomed large over policymakers and markets.
The yen was 0.2% higher at 159.02 per dollar and 0.3% firmer against the euro at 186.25, its strongest level against the European currency in the past two weeks, after the BOJ’s verdict that saw three of its nine-member board break ranks to call for higher borrowing costs.
“Three dissents is shocking,” said David Chao, global market strategist for Asia-Pacific at Invesco in Singapore. “The BOJ is sending a signal here – expectations for a rate hike in June have certainly increased,” he added. “The time of the cheap yen may be coming to an end.”
The persistent yen weakness remains a source of concern for Tokyo. Earlier on Tuesday, Japanese Finance Minister Satsuki Katayama warned speculators again, saying that volatility in the crude oil futures market is affecting currency markets, adding that authorities are “standing by around the clock” to take “decisive action”.
In its quarterly outlook report, the BOJ also sharply revised up its core inflation forecasts for the fiscal years ending March 2027 and March 2028, while slashing its growth forecasts for both years.
Governor Kazuo Ueda will hold a post-policy press conference at 0630 GMT, with traders looking for clues to the timing of the next rate hike.
Markets are also watching out for the Federal Open Market Committee meeting on Wednesday. The U.S. central bank is expected to keep rates on hold in what is likely to be chair Jerome Powell’s last meeting after Republican Senator Thom Tillis dropped his block on Kevin Warsh’s confirmation process on Sunday.
“It’s not a meeting where rates policy is on the front burner, but the FOMC assessment of the economy may improve,” said Steve Englander, global head of G10 FX research at Standard Chartered in New York. “The inflation picture is improving very slowly at best and could be an emerging issue for Warsh to deal with” when he takes office.
The Senate Banking Committee is also expected to advance Warsh’s nomination as Federal Reserve Chair to the full Senate, with a vote now set for 10 a.m. EDT (1400 GMT) on Wednesday.
The U.S. dollar index, which measures the greenback’s strength against a basket of six currencies, snapped a two-day losing streak to trade 0.1% higher at 98.51.
Central banks in the euro zone, the UK and Canada are among the others that will deliver rate decisions later this week, with the Iran war likely to take centre stage in policy deliberations.
“With every central bank that’s meeting, they’ve all made it very clear that in the fog of uncertainty about how the war will play out as far as both inflation and growth, it’s giving them every excuse they need to sit on their hands,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
U.S. President Donald Trump discussed a new Iranian proposal on resolving the war with his top national security aides on Monday. But a U.S. official said later that Trump is unhappy with the proposal because it did not address Iran’s nuclear program.
The euro was down 0.1% at $1.1713, while the British pound was trading at $1.3531. The Australian dollar was flat at $0.7185 and its New Zealand counterpart was down 0.1% at $0.5901.
Bitcoin was down 0.2% at $76,819.21, while ether fell by a similar magnitude to $2,288.66.
(Reporting by Gregor Stuart HunterEditing by Shri Navaratnam)
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