The dollar maintained its stability against the yuan on Tuesday, reacting to policy statements from China that lacked significant stimulus measures. Meanwhile, Tokyo’s inflation rebound brought Japan closer to potentially ending its negative interest rate policy.
Amid the ongoing cryptocurrency frenzy, Bitcoin traded near $66,000, reaching as high as $68,828, just below its record peak in November 2021. Bitcoin has experienced a 57% increase this year, driven by inflows into U.S.-launched exchange-traded funds.
Early updates from China’s National People’s Congress (NPC) revealed an economic growth target of 5% and a budget deficit of 3%. Analysts highlighted challenges in meeting the growth target due to factors such as a property crisis, low consumption, slow global growth, and geopolitical tensions.
The spot yuan opened at 7.1950 per dollar, while the offshore yuan remained stable at $7.2100 as markets anticipated concrete stimulus measures.
The Japanese yen maintained stability after Tokyo’s core inflation accelerated to 2.5% in February, exceeding the previous month’s 1.8%. Excluding food and energy, the inflation measure slowed to 3.1% but stayed above the Bank of Japan’s 2% target. Analysts anticipate the Bank of Japan (BOJ) to raise interest rates into positive territory next month if spring wage negotiations result in significant pay hikes.
The dollar stood at 150.44 yen, avoiding resistance around 150.85. A break higher could open the path to November’s peak at 151.92 but may also prompt Japanese intervention.
Market expectations suggest a 64% chance that the Federal Reserve will begin cutting U.S. rates in June, easing by around 75 basis points this year. Fed Chair Jerome Powell is expected to provide updates on his outlook during congressional appearances on Wednesday and Thursday.
The euro hovered at $1.08515, testing resistance around $1.0866, while the dollar index edged higher to 103.87. The European Central Bank (ECB) meeting on Thursday is anticipated to maintain rates at 4.0%, with an 88% probability of rate cuts starting in June.
Sterling eased to $1.2682 ahead of the British budget on Wednesday, where Finance Minister Jeremy Hunt aims to manage expectations regarding significant pre-election tax cuts.