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The dollar wobbled early on Tuesday after tumbling overnight against the yen, which benefited from its safe-haven status as US President Donald Trump’s tough stance on immigration rattled investors and curbed the risk appetite.
The dollar was down 0.1 per cent at 113.670 yen after dropping more than 1 per cent overnight, when it was knocked off its perch above 115.000.
A modest rise in US Treasury yields on Monday did little to help a tottering greenback, which has taken the brunt of selling in the wake of the Trump administration’s trade protectionism and tough immigration policy.
The latest blow against the dollar came after Trump ordered a temporary ban on the entry of refugees and people from seven Muslim-majority countries.
“Trump pretty much sets the direction for currencies. As such, the Bank of Japan’s policy decision is not drawing very much attention,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.
The central bank will announce its policy decision when its two-day meeting ends later on Tuesday.
“But the BOJ’s stance on yields still remains to be seen. Yields of the super long JGB sector have been rising. The yen is already appreciating on Trump and higher yields could exacerbate its gains,” Yamamoto said.
The BOJ is set to maintain its massive monetary stimulus and reassure markets any reversal of its ultra-loose policies is some time off, as recent global bond yield gains test its policy of controlling the yield curve.
The euro was flat at $1.0707. The common currency had clawed back from an 11-day low of $1.0620 on Monday, helped by data showing German consumer price inflation hit the highest in 3-1/2 years and nearing the European Central Bank’s price stability target of just under 2 per cent.
The pound was up 0.1 per cent at $1.2502, within the reach of a near one-week low of $1.2466 plumbed overnight on nervousness ahead of Thursday’s Bank of England policy meeting.
The Australian dollar added 0.15 per cent to $0.7564, on track for its third straight day of gains against its US counterpart.
The New Zealand dollar climbed 0.1 per cent to $0.7293, edging back towards an 11-week peak of $0.7314 scaled last week.
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