MW: Dollar trades in tight range ahead of Fed, BOJ
TOKYO--Investors are taking a wait-and-see approach ahead of key central-bank meetings in the U.S., Japan and England, even as oil prices recovered slightly during Asian trading.
Around 0350 GMT, the dollar was changing hands at 114.85 yen, compared with Y114.73 late Tuesday in New York.
Despite increasing expectations of a hawkish stance by the Federal Reserve, the dollar's strength against the Japanese yen was limited partly by a selloff in oil. The dollar hit a low of Y114.51 overnight, regaining some ground to Y114.82 as oil prices fell to a fresh three-month low after Saudi Arabia reported it increased output in February. Lower oil prices prompted investors to unwind long-dollar positions, sending the pair lower, said Daisuke Karakama, chief market economist at Mizuho Bank. "I got [the] impression that the dollar-yen continues to struggle to go upside," he said.
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The dollar has remained rangebound between Y112-Y115 over the past two months. Analysts said they expect the U.S. currency to continue trading in that range until there is more clarity from the Federal Open Market Committee statement.
Osamu Takashima, chief foreign-exchange strategist at Citigroup Global Markets Japan, said he believes the FOMC statement may have a dovish slant to prevent investors from being excessively hopeful about future rate increases. Such a stance should have little effect on U.S. stocks and bond yields, however, Mr. Takashima said, and may prompt investors to shift their attention to President Donald Trump's meeting with German Chancellor Angela Merkel on Friday and the G-20 meeting over the weekend.
The euro was up 0.21% at Y121.94. Bank of America Merrill Lynch said this reflects the euro's recent performance against non-dollar crosses, particularly the yen, and recommended investors take long positions on the pair after the French elections. In addition, it said the Bank of Japan "has more effectiveness in easing monetary policy" than the European Central Bank does at the moment.
The BOJ's and the Bank of England's policy meetings are due Thursday, and the Fed is expected to announce its assessment after markets close in Asia on Wednesday.
Elsewhere, the Korean won and the Taiwan dollar were each up 0.2% against the U.S. dollar in Asian trade. The WSJ Dollar Index was down 0.1% in morning trade. A forex trader with a Hong Kong bank said that most trades were being positioned to sell the U.S. dollar after the Fed meeting.