The US dollar continued its gains during the Asia session as speculation the Federal Reserve will leave rates unchanged intensifies.
“We expect the Fed to keep policy on hold but be more optimistic about the U.S. economic outlook given the limited fall‑out from Brexit and improvement in the U.S. economic data,” a Sydney-based senior currency strategists at Commonwealth Bank of Australia Joseph Capurso and Elias Haddad wrote in a note. “This will support a modest increase in U.S. interest rate expectations and support the USD.”
Whereas the markets expect the Bank of Japan to expand stimulus at monetary policy meeting due later this week. Prompting investors to start pricing in that possibility against the yen, the yen dropped to 106.71 against the US dollar as of 1:38 p.m. in Tokyo on Monday.
“The dollar is underpinned by recovering investor confidence in the U.S. economy and corporate earnings which are slightly strengthening expectations for a rate hike this year,” said Koji Fukaya, the Tokyo-based chief executive officer at FPG Securities Co. “While there is risk the BOJ may disappoint, the U.S. factors will likely limit the dollar’s downside.”
