The Bank of Japan announced at the conclusion of its meeting on Friday, that it will employ a negative interest rate of -0.1% and that it will trim rates further if necessary. On the announcement of the decision, the USD/JPY pair advanced 1.95% to 121.12, after touching session highs of 121.68, the most since December 18.
Furthermore, the dollar moves highlighted by the diverging monetary policy path between the Federal Reserve and other world central banks and the U.S. gross domestic product data which broadly matched economists’ expectations. Once again, the Fed failed to provide any signals on the pace of future rate hikes in its remarks on Wednesday. The U.S. central bank left rates unchanged at the conclusion of its two-day meeting, after hiking rates in December.
Higher interest rates make the dollar more attractive to yield seeking investors and as a result the dollar strengthened against the euro, Sterling pound and the Swiss franc.
The single currency was down 0.98% against the dollar, with EUR/USD at 1.0832 late Friday. The sterling was off 0.82% for the day, with GBP/USD at 1.4242, while USD/CHF advanced 0.93% to 1.0230.
The dollar received an additional boost after data on Friday showed that the
Based on the U.S. economy data findings, the Commerce Department said that it proves an annual rate grew by 0.7% in the fourth quarter, compared to forecasts for growth of 0.8% after 2% growth in the third quarter. The U.S. economy grew 2.4% in 2015, matching similar growth in 2014.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose to 99.88, the most since January 21 and was last at 99.6, up 0.99% for the day.
In the week ahead, investors will be awaiting Friday’s U.S. jobs report for January for fresh indications of the strength of the labor market, but also central bank meetings in the U.K. and Australia will also be in focus.