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Forex - Yen flat ahead of BoJ policy decision, dollar strength eyed

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Investing.com -

Investing.com - The yen held flat in early Asia on Wednesday with investors looking ahead to the latest central bank policy review and keeping an eye on dollar strength.

USD/JPY changed hands at 120.31, flat, while AUD/USD traded at 0.7641, up 0.10%. EUR/USD traded at 1.0818, up 0.03%.

In Japan, the BoJ is due to end its two-day policy board meeting with a decision to be announced around 1230 Tokyo time (0330 GMT). The BoJ is expected to maintain its monetary policy target as policymakers continue to monitor whether the recent drop in inflation to zero will hurt longer-term inflation expectations.

BoJ Governor Haruhiko Kuroda then holds a news conference at 1530 (0630 GMT).

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was quoted at 98.16, down 0.08% in Asia.

Overnight, the U.S. dollar rallied by more than 1% against the euro on Tuesday, amid weaker than expected services data in the euro zone and expectations for a delayed interest rate hike by the Federal Reserve.

While the Markit Eurozone Services Business Activity Index increased from 53.7 in February to 54.2 in March, expansion in output still fell below previous estimates of a 54.3 reading. Increases in Germany, Italy and Spain accelerated growth while the United Kingdom's service-sector PMI peaked at 58.9, to reach a multi-month high.

Price discounting throughout the euro zone drove growth on the continent.

Meanwhile, in the U.S. Federal Reserve Bank of Minneapolis president Narayana Kocherlakota said at a speech on Tuesday that the Fed may not need to raise its benchmark Federal Funds Rate until the second half of 2016.

"In light of the outlook for unduly low employment and unduly low inflation, the Fed can be both late and slow in reducing the level of monetary accommodation," Kocherlakota said in a speech to the Chamber of Commerce in Bismarck, N.D.

The comments came in light of a disappointing U.S. jobs report last Friday when the U.S. Bureau of Labor Statistics said in its monthly jobs report that the economy added 126,000 in March, halting a streak of 12 consecutive months of job growth that exceeded 200,000.

The modest job increases nationwide marked the weakest period of hiring in 15 months. In terms of average weekly earnings, employees nationwide received the smallest annual gains in wages since last June.

The labor force participation rate, which measures the number of people who are either employed or actively looking for work, also painted a bleak outlook. During the month of March, the rate ticked down to 62.7%, the lowest level in 36 years.

In mid-March, Federal Reserve chair Janet Yellen indicated that the Fed could begin raising interest rates when it was "reasonably confident" that inflation will move toward its target inflation of 2%. Yellen added that the Fed will take a "data-driven" approach to potential liftoff by keeping a close eye on wage and GDP growth before raising rates.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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