TOKYO: The dollar held gains against major peers on Thursday as markets positioned for key central bank decisions in Britain, Europe and Japan.
Sterling remained under pressure after an unexpected drop in UK inflation strengthened the case for a rate cut by the Bank of England. The yen pared losses from the previous session as the Bank of Japan began a two-day meeting widely expected to result in a rate hike to a three-decade high.
The dollar index, which tracks the greenback against a basket of major currencies, was little changed at 98.39 after rising 0.2% in the previous session.
The dollar was largely unfazed by comments from President Donald Trump that the next Federal Reserve chair would strongly favour lower interest rates. Analysts said weak UK inflation data had effectively sealed expectations for a BoE rate cut later in the day.
The yen slipped 0.1% to 155.87 per dollar, extending losses from Wednesday. Against the Swiss franc, the yen weakened to 195.96, close to a record low. The euro was steady at $1.1744, while sterling held at $1.3367 after falling 0.4% in the prior session.
Interest rate futures now price in an almost 100% chance of a quarter-point BoE rate cut. The European Central Bank is expected to keep rates unchanged and signal limited appetite for easing. In Asia, the BOJ is widely expected to raise short-term rates to 0.75% from 0.5%, as elevated food prices keep inflation above its 2% target.
Japanese Prime Minister Sanae Takaichi said the government must pursue proactive spending to support growth and tax revenues, underlining efforts to stabilise the economy. Some analysts expect the BOJ could raise rates twice in 2026 to address persistently negative real interest rates.
In the US, uncertainty remains over the timing of the next Fed rate cut and whether the central bank can maintain its independence as Trump weighs potential successors to Fed Chair Jerome Powell. Fed Governor Christopher Waller said the central bank still has room to cut rates amid labour market weakness, while Atlanta Fed President Raphael Bostic questioned the need for last week’s rate cut.
Trump said he would soon announce his nominee to replace Powell, adding that his pick would strongly favour lower interest rates.
Elsewhere, the Australian dollar edged up 0.05% to $0.6607, while the New Zealand dollar fell 0.2% to $0.5762 despite data showing the economy returned to growth in the third quarter.
In cryptocurrencies, bitcoin rose 0.6% to $86,509.67, while ether gained 0.3% to $2,828.33.
— Reuters
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