Dollar steady, no respite for yen after BOJ hikes rates as expected
FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 24, 2026. REUTERS/Dado Ruvic/Illustration/File Photo
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LONDON, June 16 : The dollar held at 10-day lows on Tuesday as a preliminary deal to end the Iran war buoyed risk appetite, while the yen teetered near the closely watched 160 level after the Bank of Japan hiked interest rates, as expected, in an effort to tame inflationary risks from the conflict.
President Donald Trump said on Monday that a preliminary agreement to end the war had been signed by the U.S. and Iran. But doubts swirled as shippers said it could take weeks for confidence to return after any reopening of the Strait of Hormuz and key questions remained unanswered.
The Bank of Japan raised interest rates to a 31-year high as widely expected. But the board’s 7-1 vote suggested at least some uncertainty over the timing of the next hike.
“We’ll look at whether the economy and prices are moving in line with our forecasts, as well as risks. With underlying inflation approaching 2 per cent, we need to be mindful of upward price risks. We will guide policy so that we won’t fall behind the curve,” said BOJ Deputy Governor Shinichi Uchida at a press briefing.
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Derek Halpenny, head of research for global markets EMEA at MUFG, said the BOJ was as hawkish as could have been expected.
“They’ve emphasised upside inflation risks. They’ve made that quite clear. They’ve made very clear that the monetary stance is still accommodative, and they’ve made clear that the guidance is the same as before, which is essentially that they can continue to raise rates going forward,” he said.
The yen was almost unchanged on the day at 160.31 per U.S. dollar, having hovered near the 160 milestone in recent days, keeping traders wary of another bout of intervention from Tokyo.
The Reserve Bank of Australia left rates unchanged in a unanimous decision after three consecutive hikes even as inflation remains elevated. The Australian dollar was last little changed at $0.706 after recouping some earlier losses.
IRAN DEAL LIFTS SENTIMENT BUT DOUBTS LINGER
While global markets appeared cautiously optimistic over the Iran news and oil prices pulled back, currencies were comparatively constrained as traders waited for the latest monetary policy decisions also from the Bank of England and the U.S. Federal Reserve later this week.
The dollar index, which measures the U.S. currency against six others, was steady at 99.58.
The euro was 0.16 per cent higher at $1.1605 and sterling was little changed at $1.3422.
Both the Fed and BoE are expected to leave interest rates unchanged, with traders watching closely for any clues about the potential policy paths ahead.
Wednesday’s Fed meeting is the first under new Chair Kevin Warsh.
“Warsh faces a challenging task. In more than just assessing the economic situation, the new Fed governor could initiate changes, particularly in the central bank’s communication strategy,” Mabrouk Chetouane, global head of market strategy at Natixis IM, said.
“His first steps in office and his initial statements will be closely watched, as transitional periods within the world’s most powerful monetary institution are typically a source of stress for capital markets.”
Source: Reuters
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