Dollar index falls to 3-week lows

The dollar index slumped to almost three-week lows on Tuesday as the yen strengthened after the Bank of Japan indicated that further stimulus is unlikely in the short term, and investors looked ahead to Wednesday’s Federal Reserve minutes.

USD/JPY touched lows of 102.34, the weakest since March 28 and was last down 0.70% to 102.36.

The yen strengthened after BoJ Governor Haruhiko Kuroda indicated that the bank was unlikely to implement further stimulus measures at present. He added that growth and inflation were likely to continue to pick up in the coming months despite a sales tax increase in April.

Earlier Tuesday, the BoJ voted to keep its key policy target of increasing base money unchanged at an annual pace of ¥60 trillion to ¥70 trillion after ending its two-day policy meeting.

The dollar remained under pressure ahead of the minutes of the Fed’s March meeting.

Last week’s U.S. payrolls report came in slightly below expectations, while Fed Chair Janet Yellen said recently that slack in labor markets showed accommodative policies will still be needed for some time.

EUR/USD hit highs of 1.3780 and was last up 0.28% to 1.3780. Demand for the euro was underpinned after comments by European Central Bank officials on Monday tempered expectations for quantitative easing.

ECB governing council member Yves Mersch said there is no immediate risk of deflation in the euro zone and therefore no urgent need to implement large-scale bond purchases.

Separately, Bundesbank president Jens Weidmann said that monetary policy cannot solve the financial crisis, and urged euro zone political leaders to keep reforming their economies.

The pound rose to one-month highs against the dollar, with GBP/USD climbing 0.67% to 1.6718 after data showed that U.K. industrial output increased at the fastest pace since June 2013 in February.

Meanwhile, USD/CHF was down 0.31% to 0.8850.

The Australian dollar rose to four-and-half month highs, with AUD/USD up 0.68% to 0.9332. NZD/USD jumped 0.87% to 0.8673.

Meanwhile, USD/CAD fell 0.48% to 1.0920.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.40% to 80.02.