Yen rises as BoJ lowers long dated JGB purchase

On Tuesday, the Japanese Yen jumped against its US counterpart after the Bank of Japan (BoJ) trimmed its buying of long-dated Japanese government Bonds in market operations, helping to stoke speculation about a future exit from its massive stimulus policy. The BoJ reduced the amount it bought in Japanese Government Bonds of 10 to 25 years left to maturity and those of 25 to 40 years to maturity by 10 billion Yen each from its previous operations. Since it adopted the Yield curve control policy in 2016, the BoJ has occasionally tweaked its Bond operations, with officials saying any changes are meant to keep Bond Yields in line with its policy goal and not to telegraph hints on its future policy.

The British Pound climbed to a three-week high against a weaker Euro on Monday, after a cabinet reshuffle alleviated political uncertainty that has pressured the UK currency in recent months. Prime Minister Theresa May named a new head of her ruling Conservatives on Monday, among other changes aimed at handing her government a new start after months of divisions over Brexit, scandals and an ill-judged election, which have all weighed on the Pound.

On Tuesday as well, Gold prices inched down early as the Dollar held steady amid expectations of more US interest rate hikes this year. While many Fed officials have said they expect three rate hikes this year, markets are not fully convinced as inflation remains tame despite very tight labor market conditions. Indeed, Atlanta Fed President Raphael Bostic, who is a voting member of the Central Bank’s policy board, said on Monday that two hikes might be needed in 2018, in light of weak price pressures.