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The dollar is supported by higher US rates; it only drops after the BoJ meeting

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News Tech: Rising US Treasury yields pushed the dollar index to a six-day high on Tuesday, while the Japanese yen fell after the Bank of Japan announced it would maintain its ultra-accommodative monetary policy. The US Federal Reserve Board will meet next week. A rate hike is expected in March for the first time since the coronavirus pandemic began, and investors are pricing in four rate hikes in 2022. Treasury yields surged Tuesday, with the two-year yield (which tracks short-term rate expectations) hitting 1% for the first time since February 2020 as investors braced for the Fed’s potential to be more hawkish than expected.

By 0838 GMT, the dollar had risen 0.1% against the yen to 114.72, with the pair rising to 115.06 overnight. “We continue to expect the BOJ to maintain its current policy framework at least until Kuroda’s term ends in April next year,” MUFG FX analyst Lee Hardman said in a note to clients. “The widening divergence in policy expectations from the Bank of Japan and the Federal Reserve should continue to put bullish pressure on the USD/JPY,” he wrote. However, Hardman pointed out that the pair failed to cross the 117 mark as it moved higher this month.

The 10-year yield also hit a two-year high. The US dollar rose against a basket of currencies and eased gradually overnight after reaching a six-day high of 95.454 during Asian trading. At 95.308 by 0836 GMT, he was up 0.1% for the day. The EURUSD fell 0.1% to him at $1.1395. Yen falls The yen fell after the Bank of Japan announced it would maintain its ultra-accommodative monetary policy despite countries around the world tending to exit crisis mode policies.

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“This failure, and the fact that the market has been weaker in the yen, means that the prospects for a quick USD/JPY recovery are fading…A USD/JPY recovery is possible, but this correction It could be a sign of the start of a trend for the USD/JPY to go higher at the end of the exchange rate,” he said. The Australian dollar fell 0.3% to $0.7193 on the day. The New Zealand dollar also fell 0.3%. Both currencies faced disappointing domestic data as Australian consumers were horrified by the rapid spread of the coronavirus and record deaths. Aided by UK employment data, the British pound was unchanged at $1.36405.

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