Anna 
The Japanese yen exhibited a reversal on Tuesday, strengthening on indications that the Bank of Japan (BOJ) might make policy adjustments at its next meeting. Earlier, the yen had dipped following the BOJ’s decision to maintain its ultra-easy monetary settings, meeting market expectations. The dollar registered a 0.37% decline against the yen, marking its most significant one-day fall in a month, reflective of the yen’s recent weakening trend.
BOJ policymakers opted to sustain ultra-easy monetary settings, allowing additional time to assess whether wage increases would sufficiently broaden to sustain inflation at the 2% target. While Shunto wage negotiations typically occur in the spring, BOJ Governor Kazuo Ueda indicated that many businesses have already decided on wages early, with labor unions requesting higher pay. Analysts suggest that a potential move by the BOJ could occur at its March meeting, depending on consecutive annual wage increases.
The euro experienced a marginal 0.1% decline against the yen, reaching 161.03, while sterling dipped slightly to 188.08 yen. Despite the dip, sterling remained close to its recent high of 188.91, the strongest level since August 2015.
In broader currency movements, the dollar weakened against the euro, with the latter up 0.22% at $1.0907. The pound also gained 0.23% against the dollar, reaching $1.2741. The European Central Bank (ECB) is set to meet this week, with expectations for the deposit rate to remain steady at 4.00%. ECB policymakers, including President Christine Lagarde, have pushed back against market expectations for early rate cuts.
News of China considering a rescue package for its declining stock markets boosted the yuan and the Australian dollar, often seen as a liquid proxy for exposure to China. The dollar dipped 0.3% against the offshore yuan to 7.1722 yuan. In response, the Aussie rose over 0.5% to $0.6607, and the New Zealand dollar gained 0.47% to $0.6106, recovering from a two-month low.
The dollar index fell 0.27% to 103.1, although it remained close to a more than one-month high of 103.69. Traders scaled back expectations for a Federal Reserve rate cut in March, supporting U.S. Treasury yields. The two-year yield settled at 4.398%, and the benchmark 10-year yield remained above 4%, finishing at 4.225%.
