Written by Brigid Riley and Alan John
TOKYO/LONDON (Reuters) – Traders were wary of key economic indicators and hesitant about the yen’s movements on Thursday after U.S. Federal Reserve policymakers said they were in no hurry to cut interest rates. The dollar appreciated against the euro and pound. Regarding concerns about Japanese intervention.
Japan’s currency was steady at $151.42 to the dollar on Wednesday, the lowest since 1990, before Japanese financial officials signaled they were prepared to intervene to prevent further declines. It was trading just below 152 yen to the dollar.
The euro was last down 0.33% to $1.0792, its lowest in five weeks, while the pound was down 0.25% to $1.2609. As a result, the dollar index rose 0.16% to 104.6, its highest level since mid-February.
Federal Reserve President Christopher Waller, speaking late in U.S. trading on Wednesday, said recent disappointing inflation data supported the case for the U.S. central bank to hold off on lowering its short-term interest rate target.
Market expectations that the FOMC would cut interest rates for the first time in June have subsided somewhat. Current pricing puts the probability of that happening at 60%, compared to 67% this time last week, according to the CME FedWatch tool.
“Waller is one of the Fed’s most important policymakers, so I don’t think this is a big move, but this statement is a sign that the market was stuck in a very narrow trading range,” said senior Lee Hardman. It gave me momentum.” Foreign exchange strategist at MUFG.
Traders are currently awaiting Friday’s release of U.S. core PCE inflation data and the appearance of Federal Reserve Chairman Jerome Powell.
intervention monitoring
If inflation data shows unexpected upside and supports the dollar, the most dramatic impact could be on the yen. Market participants say there is a cluster of options restricting dollar/yen movements around 152 yen, so a breakout could trigger an even bigger move.
Tsuyoshi Ishida, currency strategist at Resona Holdings, said while there may be some trades defending a rise to 152 yen to the dollar at this point, Friday’s U.S. inflation data poses significant risks.
“If USD/JPY reaches 152 yen, I think we will probably see a sharp rally. That’s when intervention may be possible.”
Japanese authorities held a meeting on Wednesday to strengthen their verbal warning on the currency’s decline, and markets are watching for signs that words will be backed up by action.
Japan intervened in the foreign exchange market three times in 2022, first in September and then in October, when the yen fell toward a 32-year low of 152 yen to the dollar, selling dollars and trading yen for yen. bought.
A summary of opinions from the Bank of Japan’s March meeting released on Thursday shows there is little support for the currency and many policymakers believe the phaseout of ultra-easy policies needs to proceed slowly. Indicated.
The Easter holiday in many markets also complicates matters.
“Investors may be nervous about holding short the yen because liquidity tends to be thin, which works to Japan’s advantage,” said MUFG’s Hardman.
Meanwhile, the People’s Bank of China set the yuan’s fixed exchange rate at the biggest difference in about five months from Reuters forecasts, as authorities step up efforts to prevent a sharp decline in the currency. The yuan fell to a four-month low last Friday. [CNY/]
The onshore yuan was almost unchanged at 7.2277 yuan to the dollar, while the offshore yuan was almost unchanged at 7.2591 yuan to the dollar.
The Swiss franc remained under pressure, with the dollar rising 0.24% to 0.9059 francs, just shy of its four-month high set a day earlier.
The Australian dollar fell 0.6% to $0.6495. In addition to being hurt by Waller’s comments, Australian data showed retail sales continued to struggle, with retail sales rising 0.3% in February, less than expected. [AUD/]
(Reporting by Brigid Riley; Editing by Lincoln Feast and Sonali Paul)
