Dollar picks up, yen steady as central banks in focus after BOJ holds

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LONDON, April 28 : The dollar strengthened slightly while the Japanese yen was broadly steady on Tuesday as markets focused on central bank policy decisions and guidance while the Iran war loomed large.

The yen had initially firmed after the Bank of Japan held interest rates steady in a split vote, but was last slightly lower against the dollar at 159.69 and little changed against the euro at 186.73. 

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 in a press conference left the door open to a rate hike but gave little indication about what the timeline for a policy change could look like. 

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“The yen strengthened right after the policy meeting because the BOJ’s economic outlook was hawkish, and there were three dissenters to the decision," Takeshi Ishida, a strategist at Kansai Mirai Bank, said.

"So the market cautiously awaited the press conference of (BOJ Governor) Ueda. But he was not as hawkish as the statement sounded, which was why the yen pared early gains."

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".

Meanwhile, 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 almost 0.3 per cent higher at 98.76.

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 was unhappy with the proposal because it did not address Iran's nuclear programme. 

While oil futures have been rising as the prospect of conflict resolution looks uncertain, the U.S. dollar has been struggling to find support in recent days. 

"I think one of the big components that is limiting the appetite for dollar buying is the resilience of US equity markets in particular. So corporate earnings are coming in strong. We've got another wave of optimism in relation to AI. So tech is outperforming," Derek Halpenny, head of research, global markets EMEA at MUFG, said.

"And I think in that context, that kind of positive global growth dynamic is offsetting some of the risks in relation to higher energy," he added.

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," Steve Englander, global head of G10 FX research at Standard Chartered in New York, said. "The inflation picture is improving very slowly at best and could be an emerging issue for Warsh to deal with" when he takes office.

Central banks in the euro zone, the UK and Canada are among the others that will deliver rate decisions later this week.

The euro was down 0.22 per cent at $1.1694, while the British pound fell 0.37 per cent to $1.3480. 

Bitcoin was last down around 0.9 per cent at $76,280.36, while ether declined by 0.7 per cent to $2,276.01.

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