Currency markets stayed stagnant as investors wait and watch central banks’ meetings across the continents. The markets stayed in limbo over the long weekend with many markets remaining closed for labor day.
The Japanese Yen witnessed its biggest daily drop since February as it slumped 1.7% lower after the BoJ announcements. The Bank of Japan stayed on course to control the inflation rate and this led to a slide in the value of Yen. The Yen slid 0,2% further Monday closing at 136.67 to the dollar.
The Australian dollar also lost value on Monday closing at $0.6610. The currency touched its seven-week low at $0.6573 and consistently found support on the $0.6564 line at the March trough.
The New Zealand dollar’s rally ended with the currency losing 0.3% to $0.6172 compared to last week. The NZ dollar did make gains compared to Yen as the central bank announced interest rate hikes. The New Zealand dollar ended up gaining 2.3% compared to Yen.
Analysts are looking at the week ahead with caution. Federal Reserve is expected to increase interest rates further by 25 basis points. The European central bank is expected to increase the interest rate by half a basis point on Thursday.
Goldman and Sachs speculate that the interest rate hikes will pause by this June. In its note to its clients analysts at Goldman said “The focus will be on revisions to the forward guidance in its statement. Beyond May, we expect the FOMC to hold rates steady for the rest of the year, though several paths are possible, with much depending on how severely the bank stress affects the economy.”
The Australian government bonds rallied on Monday as three year yields recovered from their last slide of 12 basis points and were at 3.001%. The ten year bond yields were down 5 bps and were last at 3.335%.
