The dollar is lower as traders see US rates peaking with eyes on the BoE. Due to investors’ increased confidence in the likelihood of an eventual peak in U.S. interest rates due to the Federal Reserve’s decision to maintain them, risk-averse Asia-Pacific currencies led the dollar’s broad decline on Thursday.

Now, attention is focused on the Bank of England and whether its policy decision today sends a similar message. Although the fund’s rate target limit is now at a 22-year high of 5.5%, Fed Chair Jerome Powell indicated that the risks of doing too little or too much are now balanced. Powell did, however, leave the door open for another raise.

The markets saw that as approval to maintain their sub-20% prediction that rates would increase in December. The yield on the ten-year Treasury is down 23 basis points from its peak on Wednesday as risk-sensitive currencies rose and stocks gained strength.

Head of FX research at Danske Bank Kristoffer Lomholt stated, “Powell had the opportunity to raise a bit of concern with the latest rise in short-term inflation expectations, but he chose not to do that.” “There was a possibility of sending a much more hawkish signal, but he chose not to, and I think that’s what markets are reacting to.”

The dollar index, which compares the currency’s value to six significant rivals, was down 0.1% at 106.41 as of late and had been down almost 0.8% from its peak on Wednesday. The Swiss franc increased for the second day in a row, the euro increased by 0.3% to $1.0598, and the yen gained more support from its one-year low of 150.155 per dollar.

Despite the Bank of Japan’s Tuesday easing of its yield curve management strategy, the yen has been losing ground. Following the BoJ’s decision, the euro fell to a 15-year low of 160.83 and the dollar to a one-year low of 151.74, sending markets into a state of alertness for potential intervention to support the currency.

The pace of the decline is crucial, according to Lomholt of Danske Bank. “That’s when we have seen them verbally speak against the appreciation.” According to sources who spoke to Reuters, the governor of the central bank, Kazuo Ueda, will keep rolling down the ultra-loose monetary policy and try to get out of the accommodating regime that has been in place for ten years.

Ahead of rates being kept at high levels, sterling dropped to 87.14 per euro and nudged up 0.2% to $1.2173.

The markets have completely priced a rate decrease until September 2024, far after cutbacks are anticipated to have started on the continent. Still, they price an over 90% likelihood that the Bank of England will maintain rates on hold at a 15-year high later Thursday.

According to Rabobank F.X. strategist Jane Foley, “pricing is reflecting the view that BoE rates will have to remain on ‘Table Mountain’ for some months given the U.K.’s inflation risks.”

“On the assumption that the BoE indicates … that rates are set to remain on hold for some months, sterling is likely positioned to win back a little ground versus the euro.”

After rising 0.9% on Wednesday, the Australian dollar gained 0.6% further on Thursday to reach a three-week high of $0.6439. The New Zealand dollar peaked at $0.5896 two weeks ago. Bitcoin, occasionally used as a stand-in for taking risks, crossed above $35,000 for the first time since May 2022.