Dollar retreats in Asia ahead of Fed, BoJ meet

Singapore - The dollar eased in Asia on Monday after last week's pick-up as investors await crucial policy meetings at the Federal Reserve and Bank of Japan later this week.

The greenback rose on Friday after the release of higher-than-forecast US inflation for August strengthened the case for a US interest rate hike.

But a series of below-part readings on the economy, including jobs creation and factory activity, have fuelled speculation the central bank will stop short of tightening borrowing costs, which has in turn kept the dollar in check.

"Forex markets are going to be all about central banks this week," said Greg McKenna, chief market strategist at Australia-based retail forex broker AxiTrader.

"We expect the Fed to stay on pat this week," Singapore's United Overseas Bank (UOB) said in a note, adding however it expects a 25 basis points increase when policymakers meet next on December 13 and 14.

The Fed's decision will come hours after the BoJ wraps up its own meeting. Reports last week said Japanese policymakers are discussing cutting interest rates deeper into negative territory as they struggle to kick-start inflation and economic growth.

In Singapore Monday afternoon the dollar was at ¥102.05 from ¥102.27 in late New York trade on Friday.
Japanese financial markets are closed on Monday for a holiday.

The euro was changing hands at $1.1168, up from $1.1156, while the single currency dipped to ¥113.96 from ¥114.09.

The greenback was also down against most other Asia-Pacific currencies, easing 0.6% against the Australian dollar and 0.5% against the New Zealand's dollar.

South Korea's won gained 0.3%, the Indonesian rupiah added 0.1% and the Singapore dollar put on 0.2%.
Lee Boon Keng, associate professor for banking and finance at the Nanyang Business School in Singapore, called on the Fed to act on rates soon in order to save its credibility.

"The upcoming ... meeting is the most critical one this year, not merely because it will affect the Fed's credibility, which to say the least it already hardly has much," he said.

"It is more about the leadership it is on the verge of losing because it does not have the gumption to raise interest rate, yet again, this week.

"As a central bank of the largest economy in the world, if the Fed says that it has no clue how to lead, then surely the market will take over. And guess what the financial market thrives on? Volatility."