By Uncle Banerjee
SINGAPORE (Reuters) – The dollar is under pressure after last week’s U.S. economic data showed inflation and consumer spending eased slightly, while the yen remains psychologically important on Monday. The dollar was trading directly below ¥145.
The yen fell 9% against the dollar in the first half of the year, but has fallen 0.09% to 144.45 yen in the second half of the year.
Against the euro, the yen is trading at 157.66 yen, just below the 15-year low of 158 yen set last week. The pound rose to 183.58, its highest since December 2015.
Asian currencies briefly breached $145 to the dollar on Friday, hitting an eight-month low of $145.07, as investors waited to see if Japanese authorities would intervene in the currency market. rice field.
Finance Minister Shunichi Suzuki said on Friday that Japan would take appropriate measures in response to excessive weakness in the yen, in the latest comments from government ministers and officials.
Suzuki’s comments helped contain the yen’s decline on Friday.
“Intervention is best thought of as a ladder of escalation,” said Mark Chandler, chief market strategist at Bannockburn Forex.
“Among the highest tiers are coordinated interventions…Lower tiers on the ladder of escalation are various types of oral interventions.”
After the Bank of Japan (BOJ) decided to maintain its ultra-loose policy and the yen fell to 145 yen to the dollar, Japan bought the yen in September, targeting a stronger yen for the first time since 1998. entered the market.
It intervened again in October after the yen fell to a 32-year low of 151.94 yen.
Still, there are signs that the economy is on track for a steady recovery as Japanese business sentiment improves in the second quarter as factory production and consumption increased as supply constraints eased and pandemic-induced curbs lifted. indicated by a central bank survey.
Investor attention this week will be focused on the minutes of the Federal Reserve’s June meeting on Wednesday.
At its June meeting, the central bank decided to keep rates unchanged, but signaled borrowing costs could still need to rise by up to 0.5 percentage points by the end of the year.
Economic data up until last week showed the resilience of the US economy, easing fears of a recession, but hopes increased that the Fed would stick to its hawkish stance.
But Friday’s data showed consumer spending slowed sharply while inflation was lower than expected in May, providing further evidence that the Fed’s rate hikes are having the desired effect.
“The U.S. economy is not slowing as expected,” Citi strategists said in a client note. “Surprisingly strong employment growth keeps the labor market tight, while providing nominal purchasing power to encourage service consumption.”
Markets are pricing in an 84% chance that the Fed will raise rates by 25 basis points at its July meeting, according to the CME FedWatch tool.
Investor attention will also be focused on the Labor Department’s Jobs and Turnover Survey (JOLTS), which helps gauge the U.S. labor market, and the monthly payroll report due later this week.
Strategists at NatWest Markets expect the rate-hiking cycle to be over, but say inflation data are not progressing enough that officials could raise rates again by 25 basis points in July. bottom.
“Decisions to take action will depend more than ever on data,” they said.
The dollar fell 0.4% against basket currencies on Friday to $102.86. After gaining nearly 2% in the first half of the year, the euro got off to a weak start to the third quarter, rising 0.05% to $1.0916.
The pound traded flat today at $1.2704 after gaining 5% in the first six months of the year.
The Chinese yuan strengthened after declining to near an eight-month low against the dollar over the weekend, aided by the People’s Bank of China stepping up efforts to stabilize its heavily depreciated local currency.
The Australian dollar rose 0.02% to $0.667 and the New Zealand dollar rose 0.42% to $0.615.
(Reporting by Ankur Banerjee, Singapore; Editing by Christopher Cushing and Kim Coghill)
