While US consumer confidence exceeded expectations, dollar-yen is expected to remain around ¥158 as markets assess Japanese and ECB policy amid concerns over European fiscal conditions.
In European and U.S. foreign exchange markets on the 28th, the U.S. was widely expected to maintain its monetary policy, but expectations that the tightening stance would continue supported dollar buying, keeping the dollar-yen pair in focus around ¥158. The stronger-than-expected consumer confidence index released the previous day became a factor supporting the dollar by raising expectations of further tightening.
Long-term interest rates were also expected to remain at elevated levels, providing further support for dollar buying. However, fiscal and social concerns in France prompted euro selling, sending the euro-dollar pair lower to around 1.1130. With policy decisions in Europe and Japan approaching, active trading is expected to remain limited.
The focus going forward will be the course of U.S. monetary policy and how markets price in the announcements from the ECB Governing Council and the Bank of Japan's monetary policy meeting. While markets are pricing in no rate hike at the FOMC, long-term interest rates could move again depending on the policy details.