Written by Lei Wee
SINGAPORE (Reuters) – The greenback dominated on Monday, with the yen anchored near multi-decade lows, although threats of currency intervention by Japanese authorities prevented it from heading further north.
The yen was previously valued at 151.25 yen to the dollar, and last week it bottomed out at 151.86 yen, the lowest in four months, approaching the 32-year low of around 152 yen to the dollar hit in 2022. Ta.
Japan’s top currency diplomat said on Monday that the yen’s current weakness does not reflect its fundamentals, adding to the rhetoric of government officials who have increased warnings in recent days about the currency’s decline.
The move followed the Bank of Japan’s (BOJ) decision to raise rates at its March policy meeting, which was widely reported. Importantly, traders also expect Japanese interest rates to remain low for some time yet, thus maintaining a significant interest rate differential with the US.
“The dollar/yen pair has very strong short-term resistance due to verbal intervention from Japanese officials,” said Carol Conn, currency strategist at Commonwealth Bank of Australia.
“The market is well aware of the possibility of actual currency intervention by the authorities, so I think that is preventing a significant rally in USD/JPY.
“If USD/JPY rises significantly, perhaps to 155 yen, I still think there is a high risk that they will support the yen. That is still considered a red line.”
A shift in the global interest rate outlook following a series of central bank meetings has pushed the dollar higher on expectations that the Federal Reserve is likely to keep interest rates unchanged for an extended period of time as other countries begin to cut rates. new life is being breathed into.
Expectations for interest rate cuts by the European Central Bank and the Bank of England in June rose significantly after the Swiss National Bank became the first major central bank to cut interest rates last week.
This continued to put pressure on currencies, with the euro last down 0.03% to $1.08045, near a three-week low.
Sterling fell 0.02% to $1.25985, after falling more than 1% last week following dovish signals from the BoE. The Financial Times also reported on Friday that Governor Andrew Bailey said interest rate cuts were “on the way” this year.
Chris Weston, head of research at Pepperstone, said: “Expectations are rising that the BoE and ECB will meet as early as June, and there are even signs that the BoE’s May meeting could be live.” It shows,” he said.
In comparison, some market expectations are that the Fed’s easing cycle will begin in June, but a series of solid U.S. economic data suggests that the Fed is actually on track to cut interest rates three times this year. There is a suspicion that this is not the case.
The dollar index was last up 0.03% at 104.46, up nearly 1% for the week last week.
Elsewhere, the Australian dollar fell 0.05% to $0.65115, and the New Zealand dollar fell 0.13% to $0.5987.
Both currencies are under pressure, in part, from the depreciation of the renminbi, as both currencies are often used as liquidity substitutes for the Chinese currency.
The onshore yuan still ended domestic trading at a four-month low after the yuan’s depreciation exceeded a key threshold on Friday, prompting state-owned banks to intervene to defend the yuan. Since then, there has been little success.
Market expectations for further monetary easing to support the world’s second-largest economic growth have put pressure on the yuan.
In the offshore market, the yuan last fell slightly to 7.2761 yuan to the dollar.
(Reporting by Rae Wee; Editing by Shri Navaratnam)
