Forex- U.S. Dollar Falls Ahead of Fed; Yen Gains Despite Improved Market Sentiment

© Reuters. – The safe-haven yen rose on Monday in Asia even after China’s aggressive monetary easing improved investor sentiment, while the U.S. dollar slipped ahead of Wednesday’s minutes of the Federal Reserve’s December meeting and a speech by Fed Chairman Jerome Powell a day later.

The pair was down 0.4% to 108.15 by 11:13 PM ET (04:13 GMT). Meanwhile, the yuan was little changed against the U.S. dollar after the People’s Bank of China (PBOC) cut the reserve requirement ratio for banks by 1% last Friday as Beijing hoped to stimulate lending after weaker-than-expected PMI data released last week suggested a slowing economy.

The cut will release a net 800 billion yuan ($117 billion) of liquidity, the central bank said in a separate statement, adding that the cut is still a “targeted” easing rather than wide-ranging stimulus.

The People’s Bank of China (PBOC) set the yuan reference rate at 6.8517 vs Friday’s fix of 6.8586.

Meanwhile, the that tracks the greenback against a basket of other currencies fell 0.2% to 95.523 as traders tried to determine the Fed’s outlook on monetary policy.

Last month the Fed voted to increase interest rates for the fourth time in 2018 and indicated that two more rate hikes this year are likely. While investors will be carefully scrutinising the minutes, they will probably be dated following remarks by Fed Chairman Jerome Powell last Friday.

Powell pledged that the central bank would be watching how the economy performs this year and will adjust policy accordingly.

“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.

Powell is due to deliver remarks at The Economic Club of Washington on Thursday, and U.S. inflation figures are due out on Friday.

Elsewhere, the pair and the pair both gained 0.3%.

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