The dollar inched higher against the yen and a handful of other major currencies in holiday-thinned trade on Tuesday, with sterling by far the biggest faller as concerns over next year's Brexit negotiations continued to weigh heavily.
The Bank of Japan will release its Monetary policy statement and press conference between the end of Monday and the beginning of Tuesday Dec. 20. Analysts are expecting the central bank to keep the quantitative easing unchanged and negative rates on hold. The weak Japanese yen and hawkish U.S. growth expectations have given the BOJ room to hold and even improve its economy assessment.
Global equities, currencies and commodities took a hit after the Federal Reserve’s decision to raise interest rates on Wednesday for the second time in a decade. The 25-basis points increase was almost fully priced in and didn’t take market participants by surprise, but the strong reaction seen in the dollar and U.S. bond yields was due to the new projections for 2017, which showed the central bank now expects three rate hikes for 2017 rather than only two seen in September.
The euro was back under pressure on Friday after an extension of the European Central Bank's program of money-printing drove its biggest daily loss against the dollar since Britain's vote to leave the European Union in June.
The euro jumped above $1.07 for the first time since mid-November on Monday, rebounding around 2 cents after hitting 21-month lows after Italy's prime minister conceded defeat in a referendum on constitutional reform and said he would resign.
European stocks and the euro rose on Monday, battling back as investors bet that Prime Minister Matteo Renzi's resignation after voters rejected his constitutional reforms would not trigger a snap election in Italy.
The dollar gained ground against the yen on Tuesday after a roller-coaster 24 hours which traders say may just be a precursor to three weeks of risk-packed events for the $5 trillion a day currency market.