Dollar steadies, yen regains footing after BOJ's meeting

The Japanese yen rose on Thursday as investors assessed the latest signals from the Bank of Japan regarding the interest-rate path, while also monitoring Nvidia’s earnings for clues about demand for artificial intelligence technologies.

The yen gained 0.2% against the US dollar to 155.99, on track to break a two-day losing streak after Governor Kazuo Ueda kept the possibility of near-term rate hikes on the table.

Mixed Signals from Tokyo

In an interview with the Yomiuri newspaper, Ueda said the central bank will evaluate incoming data at its March and April meetings to determine the direction of monetary policy. His remarks came days after reports suggested Prime Minister Sanae Takaichi had voiced concerns about further monetary tightening during a meeting with the governor.

David Chao, global market strategist for Asia-Pacific at Invesco, said the Bank of Japan is “walking a tightrope,” but he still expects two rate hikes this year, forecasting the yen to be among the top-performing currencies.

Meanwhile, the Japanese government appointed two academic members widely seen as strong supporters of economic stimulus to the central bank’s board.

Board member Hajime Takata also warned about the risks of inflation exceeding target levels, calling for gradual interest-rate increases.

Limited Reaction to Nvidia Results

Despite strong earnings from Nvidia, futures for both the S&P 500 and Nasdaq slipped 0.1% each, reflecting a lack of clear shift toward risk appetite.

The US Dollar Index, which tracks the greenback against a basket of six major currencies, was steady at 97.678.

Federal Reserve Outlook

Markets continue to price in a pause in interest rates at the upcoming Federal Reserve meeting. According to the CME FedWatch tool, futures currently reflect a 98% probability of rates remaining unchanged at the March 18 meeting.

US 10-year Treasury yields rose slightly by around 0.2 basis points to 4.0518%.

Political and Trade Risks

Uncertainty remains over how US President Donald Trump will respond to the Supreme Court ruling on February 20 that invalidated the emergency tariffs he previously imposed.

US Trade Representative Jamieson Greer said tariff rates on some countries could rise to 15% or more instead of the current 10%, without specifying which countries would be affected.

Geopolitics Back in Focus

Markets are also watching a new round of nuclear negotiations between the United States and Iran in Geneva aimed at resolving the long-running dispute.

Economists at Goldman Sachs said geopolitical developments — including tensions in the Middle East, uncertainty surrounding a potential Russia–Ukraine peace agreement, and fragile US–China relations — remain key risks.

Major Currency Moves

The euro was steady at $1.18, while European Central Bank President Christine Lagarde said policymakers expect inflation to stabilize around 2% soon.

The British pound fell 0.3% to $1.35, with traders focused on local elections in Manchester seen as a key test for Prime Minister Keir Starmer and the Labour Party.

In China, the offshore yuan rose 0.3% to 6.8344 per dollar — its strongest level in nearly three years — despite signals from the central bank indicating a desire to limit rapid currency appreciation.