Rate Hike Possibilities Revived

The US dollar fell slightly on Tuesday ahead of the Fed Reserve’s two-day policy meeting, while the yen saw unexpected gains despite speculation that the Bank of Japan (BoJ) will introduce new monetary easing measures.

The dollar was 0.9 percent lower than its Japanese counterpart at 104.84. EUR/JPY was at 115.19.

The meeting of the BoJ which will end on Friday has caused a lot of talk about the announcements which will be made following the meeting, starting with strong expectations that the bank will take some form of easing steps.

Reuters reported that Japanese government sources have said that Tokyo is compiling a spending package worth around 189 billion dollars, and a Nikkei report said that Japan was likely to inject 6 trillion yen in direct fiscal outlays into the economy in the next few years.

The yen had seen gains in early Asian trading following a report showing that the corporate services price index exceeded expectations adding 0.2 percent.

Investors are also speculating the timing of a second rate hike, since last December’s rate hike which was a first in almost a decade for the United States. Chances for a rate hike this December were at 56 percent according to Reuters.

The US dollar Index which tracks the greenback against a basket of six major currencies was 0.1 percent lower at 97.173.

Elsewhere GBP/USD was last seen at 1.3104, 0.27 percent lower, AUD/USD added 0.05 percent trading at 0.7474.

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