The United States dollar index or it is also known as DXY fell about 0.8 percent to the 103.80s. That was happened at the start of Tuesday's (20/December) New York session.
A shift in the attitudes of the European central banks and Japan in a more hawkish direction has put pressure on the greenback. That is why; that sector is not stable enough.
Meanwhile, some US economic data hinted at the property sector's situation deteriorating amid high inflation and interest rates. The Central Bank of Japan (BoJ) this morning announced a surprisingly small policy change for financial markets.
This was like widening the target range of 10Y bond yields. Market participants see it as a first step towards a more hawkish monetary policy future in the country of Sakura.
AUD / USD Declined by 3%
Consequently, USD/JPY plummeted about 3 percent in less than one session. EUR/USD pair also maintained its position within its highest range since June.
The announcement of the results of the ECB's policy meeting last week expressed a more hawkish stance than the market expected. That is why; the Euro strengthened against most other major currencies,except the yen.
The ECB clearly wants a stronger euro to help it in the battle against inflation. That point was said by the analysts from ING said in a note today.
Besides that, clearly in the ECB's press conference last week, President Christine Lagarde was eager to highlight that the ECB will do monetary tightening longer than the Fed.
Elsewhere, USD Collapsed
The American dollar index collapsed as it strengthened between its two major rival currencies. That is although the greenback still outperformed the Australian dollar and New Zealand dollar.
Dixie's decline continued at the start of the New York session, following the release of disappointing United States housing data which was released sometime ago.
The U.S. Census Bureau reported that building permits growth shrank by -11.2 percent for month over month in November. In fact, the data had contracted by -3.3 percent in the previous month.
The United States Commerce Department reported Housing Starts data was slightly better than expectations. However, growth was also negative at a rate of -0.5 percent for month over month in the same period.
Japan Suddenly Change It’s Yield Target
The US dollar sank to a 4-month low against the Japanese yen in Tuesday's trading. Japan's central bank (BoJ) suddenly widened its key bond yield target, sending the USD/JPY rate slumped about 3 percent.
That made this pair came to a low of 132.90s when this news was written. BoJ announcements usually do not trigger major turmoil in financial markets, given that the central bank very rarely changes its stance.
However, this morning's announcement caused quite a stir as the BoJ confirmed a change in its policy direction to be more hawkish. The BoJ has not changed its benchmark interest rate.
However, it thas widened the yield curve control (YCC) target range for 10-year Japanese government bonds (JGB 10Y). The YCC target range for short term JGB remained -0.1%.
Yen May Strengthen Further
Besides that, the 10Y JGB target increased from 25 basis points around zero (between -0.25% to +0.25%) to 50 basis points around zero (between -0.50% and +0.50%).
The move hints at the BoJ taking steps to raise interest rates or tighten monetary policy next year. Analysts are also optimistic that the yen exchange rate may strengthen further.
It is as the BoJ's monetary policy gradually tightens. It's completely different than usual, as said by Bart Wakabayashi of Tokyo's State Street, where people are watching them start testing the market on an exit strategy.
This will depend on Kuroda's comments in a press conference kater today. However, people could expect a breakout (USD/JPY) below 130 to be within reach this year.
