FOREX-Dollar eases as oil prices fall on pause in Middle East conflict

The Bank of England and Bank of Japan are widely expected to keep interest rates unchanged at their meetings on Thursday and Friday, respectively, while maintaining a cautious stance on inflation.

With the yen pinned near last week’s 40-year lows against the dollar, the Bank of Japan is expected to leave the door open to further hikes to arrest the currency’s decline, although policymakers will likely stay ambiguous on the pace and timing of the moves. Verbal efforts to support the Japanese currency have so far yielded muted results.

"The MoF’s intervention window looks increasingly like it has passed," Ford said.

"They need concrete evidence the USD top has been found," added Ford, who sees the risk of intervention beginning to climb once it has become clearer that oil is also shifting lower.

The pound pared early gains to trade about 0.1% lower at $1.3308 ahead of Thursday’s BoE meeting. The central bank faces renewed inflation risks from higher oil prices, just days after new Prime Minister Andy Burnham and finance minister John Healey took office.