FOREX-Yen picks up, dollar nudges lower as BOJ, Fed hold rates steady

BY Reuters | ECONOMIC | 07:08 AM EDT

* FOMC maintains policy rate in 3.50%-3.75% range as expected

* Fed funds futures imply U.S. central bank to stand pat all year

* BOJ votes 8-1 to hold interest rates (Updates numbers in European mid-morning, adds quote)

By Sophie Kiderlin and Gregor Stuart Hunter

LONDON/SINGAPORE, March 19 (Reuters) - The Japanese yen strengthened on Thursday after Bank of Japan Governor Kazuo Ueda left the door open to an April rate hike, while the dollar edged lower as markets focused on an array of central bank meetings in the shadow of the Iran conflict.

The yen was last around 0.4% higher at 159.22 per dollar, having firmed after Ueda's comments. The BOJ on Thursday kept its rate at 0.75% and maintained its assessment that the economy was recovering moderately.

"The market took Ueda's remarks hawkish. Ueda made a hope alive for the April rate hike by saying the central bank will study various data before raising rates, and the BOJ will introduce new measures for CPI data," said Takashi Fujiwara, chief fund manager at Resona Asset Management's fixed income investment division.

The BOJ decision came midway through a pivotal stretch of major central bank meetings, as traders hunt for clues on how policymakers will respond to the energy price shock.

Oil prices climbed further, with Brent crude futures rising 6.1% to $113.92 a barrel as energy infrastructure across the Middle East came under attack.

The Federal Open Market Committee held interest rates steady on Wednesday and projected higher inflation, steady unemployment and a single reduction in borrowing costs this year, a path that U.S. Fed Chair Jerome Powell said was subject to unusually high uncertainty as policymakers take stock of the U.S.-Israeli strikes on Iran.

"Chair Powell was extremely vague on how the FOMC would respond to the war," said Steve Englander, global head of G10 FX research at Standard Chartered in New York.

"The hawkish part was the frustration Powell expressed at the slow pace of disinflation, very explicitly conditioning further policy rate cuts on inflation moving closer to target."

The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was last 0.08% lower at 100.12, near its highest levels over the last four months, as traders reined in bets that the Fed would cut interest rates later this year.

Financial markets are almost fully pricing in a hold at the U.S. central bank's April 29 meeting, with expectations of further easing pushed out to 2027.

The euro nudged 0.17% higher to $1.1468, while the British pound edged up 0.14% to $1.3272 after data showed that British wages, excluding bonuses, rose at their slowest pace since late 2020 in the three months to January.

Both the European Central Bank and the Bank of England are expected to keep rates on hold when they announce policy decisions later on Thursday, with investors again set to keep a close eye out for any hints from policymakers about the inflation and rate outlook.

The Swiss franc, meanwhile, weakened after the Swiss National Bank kept rates unchanged and signalled a readiness to intervene to curb a recent surge in the currency. The euro was last close to 0.5% higher against the franc.

The Australian dollar edged up 0.4% to $0.7050 after data for February showed unemployment ticked higher to 4.3%, slightly above market estimates, and the Reserve Bank of Australia on Thursday warned the conflict in the Middle East was a material risk to the domestic economy.

Bitcoin was around 1.35% lower at $70,285.66, while ether lost 0.5% at $2,178.05. (Reporting by Sophie Kiderlin in London and Gregor Stuart Hunter in Singapore, additional reporting by Junko Fujita; Editing by Shri Navaratnam, Thomas Derpinghaus, Andrew Heavens and Pooja Desai)

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