The Australian Dollar stayed strong on Thursday as opinion mounted about the Reserve Bank of Australia’s (RBA) tightening plans, whilst the Yen remained stable as the Bank of Japan kept policy steady as forecast.

The Australian dollar was at $0.7504, close to its three-month high as Australian bond yields rose to their highest since the middle of 2019, as the central bank declined to buy a government bond within its stimulus programme. 

There was a slight 0.48% dip for the Australian Dollar after the Reserve Bank of Australia’s Deputy Governor Guy Debelle stated policy was aiming for more inflation, just not a “lot more.”

“For the first time in what has felt for a long time, currencies are really driven by interest rate differentials, as central banks start to telegraph where they are in their normalisation cycles,” said Kim Mundy, senior economist and currency strategist at Commonwealth Bank of Australia.

Elsewhere the Dollar moved 1.16% lower against the Yen to 113.63, not far from its four-year top of 114.69 last week. The Bank of Japan also slashed consumer inflation to 0% from 0.6% for the year ending in March 2022, Reuters reports.

There was little change to the Euro at $1.1606 ahead of the European Central Bank meeting, remaining over its 15-month low of $1.1523 hit earlier in the month.

“We think ECB President Christine Lagarde will use all her diplomatic skills to moderate the diverging views of hawks and doves within the Governing Council on Thursday” according to ING analysts, adding they expect a neutral message which “may ultimately defy some of the market’s hawkish expectations”.

In addition, the Canadian Dollar dipped on news the central bank may hike rates as soon as April 2022, sitting at $C1.2370.

There was little change to the Pound, at $1.3745 at the time of writing, whereas the Pound to Euro exchange rate was trading at around 1.1844, after dropping 0.21% in the mid-week session, reports Pound Sterling Live.