Shaky yen looks to BOJ, euro pauses before ECB review




Shaky yen looks to BOJ, euro pauses before ECB review


By Stanley White

TOKYO (Reuters) - The yen traded near an eight-month low versus the dollar on Tuesday, while the euro held steady as investors awaited meetings of the Bank of Japan and European Central Bank amid a slightly improving backdrop for global growth.

The BOJ is first off the block with its two-day meeting ending later in the day. The central bank is expected to keep policy on hold, with traders focusing on comments from governor Haruhiko Kuroda to gauge the rates and economic outlook after the conclusion of a preliminary U.S.-China trade deal last week.

The euro was locked in a narrow range before a European Central Bank (ECB) meeting on Thursday where it is expected to launch a comprehensive review of central bank strategy, including the ECB's inflation target.

Trading in key currencies is likely to be subdued as investors try to assess how major central banks will respond to receding risks to the global economic outlook.

"The International Monetary Fund has revised up Japan's economic forecasts due to government stimulus, and dollar/yen is likely to edge higher as equity markets show risk-on trades," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

"The euro zone economy has bottomed out, but the ECB is waiting for signs that the economy is picking up, so a recovery in the euro is likely to be delayed."

The yen was little changed at 110.17 per dollar on Tuesday, close to its lowest since May 2019.

Against the dollar, the euro (EUR=EBS) traded at $1.1096. The common currency was also quoted at (EURGBP=D3) 85.34 pence.

The dollar index against a basket of six major currencies stood at 97.606, near the highest level in a month.

At the two-day rate review that ends on Tuesday, the BOJ is set to keep its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero.

The BOJ is also set to nudge up its growth forecasts as improved macroeconomic indicators take some pressure off the central bank for more stimulus, but traders will scrutinize Kuroda's remarks after the policy decision.

The ECB's first meeting of the year is most likely to launch a rethink of an inflation goal the bank has failed to meet since 2013.

The scope and scale of the review will be a key focus for markets given the far-reaching implications for monetary policy.

A slightly brighter tone to data means the ECB's assessment of the economic outlook will also be watched closely by investors on Thursday.

Elsewhere in currencies, the Australian dollar was little changed at $0.6876 before labor market data on Thursday that could help determine whether the Reserver Bank of Australia lowers rates at a meeting on Feb. 4.

The New Zealand dollar was also steady at $0.6609 as traders braced for the release of consumer price data on Friday.





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