Currencies in uncertainty ahead of a full week from central banks

Activity in the foreign exchange markets was subdued due to Labor Day in Singapore, Hong Kong and China. Japan, Australia and New Zealand are the only Asian centers open.

The Japanese yen fell 0.2% on Monday to 136.67 to the dollar, extending its post-BOJ decline. The Bank of Japan (BOJ) maintained monetary policy on Friday, sending the yen down 1.7% in its biggest daily decline since early February.

The Aussie dollar was also on the defensive on Monday, down 0.1% to $0.6610. The coin fell 1.1% last week to hit a seven-week low of $0.6573, but found strong support at the March low of $0.6564.

The New Zealand dollar fell 0.3% to $0.6172, reversing some of last week’s impressive rally.

The kiwi was up 2.3% against the yen on Friday as the prospect of higher interest rates, with the Reserve Bank of New Zealand raising rates further this month, attracted a number of buyers.

The unexpected contraction in Chinese manufacturing activity in April and the news over the weekend that major U.S. banks, including JPMorgan Chase & Co, have bid on First Republic Bank weighed on risk sentiment on Monday.

For the week ahead, the Reserve Bank of Australia is expected to extend the interest rate pause on Tuesday, the Federal Reserve is expected to raise interest rates another 25 basis points on Wednesday, and the European Central Bank may surprise with a hike excessive half-point hike on Thursday.

Goldman Sachs expects the Fed to usher in a pause in June after making a quarter-point hike on Wednesday.

“Emphasis will be on guidance revisions in its statement,” Goldman analysts said in a statement to clients.

“After May, we expect the FOMC to hold interest rates steady for the rest of the year, although there are several paths forward, much of which will depend on the severity of the banking crisis. on the economy.”

Following their overseas counterparts, Australian government bonds rose on Monday.

The three-year rate fell to 12 basis points but has since pared its losses, most recently standing at 3.001%, while the ten-year rate fell 5 basis points to 3.335%.