By Alun John

HONG KONG, (Reuters) – The yen was on the sidelines in trading early Thursday morning as traders looked for potential catalysts at the Bank of Japan or European Central Bank policy meetings.

While the dollar was stable against the yen at 113.8 it wasn’t too far away from the four-year peak of 114.69 on October 20, the euro dropped 0.1% towards $1.1591, heading back to its previous 15-month lows of $1.1523 and $1.1523 earlier in this month.

Australian dollars fell 0.3% to $0.7491, but it remained near the three-month high. The central bank decided not to purchase a bond from the government as part of its stimulus program. However yields were much higher than its 0.1% target. The move sent bond yields higher a day following a surprising rise in core inflation that sparked rate-hike speculation. [L1N2RO015]

It is crucial to the case of the Reserve Bank of Australia that the 0.1% cash interest rate won’t rise before 2024. Markets are betting that it will rise sooner than that, possibly even as early as mid-2022.

Kim Mundy (OTC: Senior economist, currency strategist, Commonwealth Bank of Australia) stated that “For the first-time in a very long time, currencies are actually driven by interest rates differentials as central banks begin to telegraph their position in normalization cycles.”

Expect the Bank of Japan to maintain monetary policy levels steady Thursday. It also projects that inflation will stay below its 2% target at least for two additional years. Market bets are reinforced by market predictions it will trail other central banks when dialing back crisis-mode strategies.

The BoJ will likely examine the rebounding CPI due to rising commodity prices. A Bank of America analyst (NYSE:), wrote in a note that they believed it would maintain the status quo in all policy settings.

Thursday’s European Central Bank meeting is also scheduled. Investors are closely watching for the ECB’s stance in relation to rising consumer prices around the world and clarity regarding its policy stance.

Although key decisions regarding the ECB’s emergency stimulus will be made at their December meeting (see below), traders are still looking for clues to Thursday’s meeting due to the sudden jacking up in rate-hike expectation.

“We think that Christine Lagarde (ECB President) will utilize all of her diplomatic skills in order to moderate the diverging opinions of hawks & dovs within the Governing Council” stated ING analysts.

On the opposite end of the spectrum was the Bank of Canada, which indicated Wednesday that it may raise interest rates as early as April 2022. It also stated on Wednesday that inflation will remain above target for much of next year due to increased energy prices and supply shortages.

In the latest news, the dollar was down against the Canadian dollar and reached $C1.2369.

The Sterling exchange rate was $1.3725 unchanged

The bitcoin price was $58,350. This is a continuation of its decline from October 20, which saw it reach a record low of $67,000. At $3,926 Ether was stable.