Dollar steady ahead of fresh U.S. inflation report

by Jonathan Adams
Dollar

The yen softened to 159.94 per dollar in early trade on Monday, its lowest level since April 29, when the yen hit a 34-year low of 160.245 leading to Japanese authorities spending around 9.8 trillion yen to support the currency

The dollar was steady on Monday ahead of a fresh U.S. inflation report that will likely influence the interest rate outlook, while the yen stayed near the 160 level, drawing verbal warnings from Japanese authorities as intervention fears grip markets.

The yen softened to 159.94 per dollar in early trade on Monday, its lowest level since April 29, when the yen hit a 34-year low of 160.245 leading to Japanese authorities spending around 9.8 trillion yen to support the currency.

The yen was last marginally firmer at 159.70 per dollar after Japan’s top currency diplomat Masato Kanda said on Monday authorities will take appropriate steps if there is excessive foreign exchange movement, and that the addition of Japan to the U.S. Treasury’s monitoring list would not restrict their actions.

We will firmly respond to moves that are too rapid or driven by speculators, he said, but noted authorities have no specific levels in mind on when to intervene.

The yen has come under fresh pressure after the BOJ decision this month to hold off on lowering bond-buying stimulus until its July meeting. It is 1.4% lower in June.

It is pretty remarkable despite expectations of further BOJ policy tightening dollar/yen continues to creep higher and is now back up to 160, according to Carol Kong, currency strategist at Commonwealth Bank of Australia.

A summary of opinions at the Bank of Japan’s June policy meeting on Monday showed some policymakers called for increasing interest rates in a timely fashion as they saw a risk of inflation overshooting expectations.

I think unless the BOJ gives very hawkish hints on policy, which is unlikely, dollar/yen is unlikely to turn around sustainably, Kong said.

The yen, which is highly sensitive to U.S. Treasury yields, is down more than 10% against the dollar so far this year, weighed down by the wide difference between rates in Japan and the US.

Meanwhile, spot yuan was trading at 7.2615 per dollar, within a very narrow range and close to its lowest in seven months, dragged by broad strength in the dollar and concerns about weakness in the world’s second-largest economy.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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