Forex – Yen weakens further as investors eye monetary policy divergence

Investing.com – The yen weakened further in Asia on Monday with trade data showing better than expected figures though exports and imports declined notably ahead of a week that will see the Fed and the Bank of Japan comment on monetary policy.

USD/JPY changed hands at 106.45, up 0.30%, while AUD/USD traded at 0.7470, up 0.07%. GBP/USD traded at 1.3127, up 0.13%.

In Japan, the adjusted trade balance came in at a surplus of ¥33 billion, better than the ¥24 billion seen and imports eased 18.8%, less than the 19.7% drop expected and exports fell 7.4%, less than the 11.6% decline seen. The overall trade balance came in at a surplus of ¥693 billion, better than the ¥495 billion expected.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.09% at 97.50.

Ahead this week, investors will look to Wednesday’s highly-anticipated Federal Reserve policy statement for fresh guidance on the pace of interest rate hikes over the next several months and a monetary policy announcement from the Bank of Japan on Friday, amid growing expectations for further stimulus.

Last week, the U.S. dollar rallied to a four-month high against a basket of major currencies on Friday, boosted by the diverging monetary policy outlook between the Federal Reserve and other global central banks.

A recent string of better than expected U.S. data reignited speculation that the Federal Reserve will raise interest rates before the end of the year. Interest rate futures are currently pricing in a 45% chance of a rate hike by December, compared with less than 20% a week ago and up from 9% at the start of this month.

For this week, data on U.S., U.K. and European second quarter gross domestic product is also due.