Dollar remains stable, Thanksgiving approaches as yen faces challenges

Market Updates: Yen and Currency Trends

SINGAPORE, Nov 24 – The dollar held steady on Monday, amidst speculation about potential intervention regarding the yen. Traders were particularly cautious as they awaited Britain’s budget announcement during a holiday week, which coincides with New Zealand’s anticipated interest rate cut.

Trading activity in Asia was light given the holiday in Tokyo, with the yen remaining stable at 156.53 yen per dollar.

The yen, weakened by low interest rates and relaxed fiscal policies, had recently bounced back from a ten-month low. This rebound followed Japanese Finance Minister Satsuki Katayama’s stern warnings against excessive yen purchasing.

Traders are closely watching for possible intervention between the 158 and 162 yen range, suggesting that authorities might act later this week due to thinning trading conditions linked to Thanksgiving.

“We think an intervention might happen before the Friday close in London/New York time,” OCBC strategists noted. “However, if it does occur, the yen could decline sharply, particularly if liquidity is low.”

Takuji Aida, a member of Japan’s key government committee, suggested on a public broadcaster that Japan might intervene in the currency market to mitigate the adverse economic effects of a depreciating yen.

Meanwhile, the euro remained flat at $1.1520, despite renewed speculation about a possible US interest rate cut in December. New York Fed President John Williams mentioned there might be room for short-term rate reductions, but this hasn’t visibly influenced the market yet.

The dollar index remained virtually unchanged at 100.15, as other significant currencies also held near their recent lows.

The British pound was at $1.3097, just ahead of the upcoming budget announcement. Rachel Reeves, the Chancellor, is trying to strike a balance between demonstrating fiscal discipline and injecting support for sluggish growth.

On the other hand, the New Zealand dollar traded at $0.5609, down nearly 8% since July, as the economic outlook continues to worsen. The market largely expects the Reserve Bank of New Zealand to lower interest rates by 25 basis points on Wednesday, yet there’s some uncertainty about additional cuts next year.

Additionally, the Australian dollar stood at $0.6460, with attention on Wednesday’s CPI data release, which will be the first complete monthly price update. Analysts predict the annual CPI will remain at 3.6% based on a Reuters poll.

“We believe this outcome might lead to perceptions that the RBA won’t make further rate cuts in this cycle,” remarked Peter Dragicevic from Kopay, a payments firm.