Written by Sophie Kiderlin
LONDON, June 16 (Reuters) – The dollar held near a 10-day high on Tuesday as the first deal to end the Iran war boosted appetite, while the yen strengthened near the much-watched 160 level after the Bank of Japan raised interest rates, as expected, in an effort to reduce inflationary risks from the conflict.
US President Donald Trump said on Monday that the first agreement to end the war in the Middle East had been signed by the US and Iran. But skepticism about the interim deal has surfaced and shippers say it could take weeks for confidence to return after the Strait of Hormuz reopens.
A number of central bank meetings this week are also important for investors.
The Bank of Japan raised interest rates to a 31-year high on Tuesday as widely expected. But the board’s 7-1 vote was noted by market analysts, suggesting at least some uncertainty over the timing of the next hike.
Investors also closely followed the press conference from BOJ Vice Governor Shinichi Uchida.
“We will look at economic, price and financial developments, especially in the light of the situation in the Middle East, at the moment. We will look at whether the economy and prices are moving in line with our forecasts, as well as the risks. As the underlying inflation is approaching 2%, we need to be aware of the risk of rising prices. We will direct the policy to avoid a decline,” he said.
Derek Halpenny, head of global market research EMEA at MUFG, said “if I look at everything that has happened, the statements, the messages, Vice Governor Uchida, I think they have been as hawkish as you would expect.”
“They have emphasized the risk of inflation. They have made that clear. They have made it clear that the monetary situation is still appropriate, and they have made it clear that the direction is the same as before, the basis of which is that they can continue to raise rates going forward,” he said.
The yen was almost unchanged on the day at 160.26 to the US dollar, as it has hovered near the 160 mark in recent days and is keeping traders wary of further intervention from Tokyo.
Elsewhere, the Reserve Bank of Australia left rates unchanged in a unanimous decision after three consecutive hikes as inflation remained high. The Australian dollar was last down 0.1% at $0.706.
Later this week, monetary policy decisions will also come from the Bank of England and the US Federal Reserve.
IRAN DEAL BOOSTS SENTIMENT BUT DOUBT IS ALOT
While global markets appeared cautiously optimistic about the Iran news and the rebound in oil prices, financial market reactions were relatively restrained as traders awaited comments from central banks around the world.
