SINGAPORE: The yen traded erratically after falling to year-end lows against the dollar on Monday, breaching the critical 145 level as traders cautiously look for clues to possible intervention. The dollar rose to a more than one-month high.
The Japanese yen fell to 145.22 yen to the dollar at the beginning of Asian time, hitting its lowest since Nov. 10, 2022 before quickly reversing. The dollar recently leveled off at $144.96 for the day.
Japan’s low interest rates have made the currency a favorite target for short-selling and funding deals, and the widening gap between U.S. and Japanese interest rates has helped keep the yen weak.
The yen has fallen about 20% since the Federal Reserve launched a rapid rate hike in March 2022 to combat skyrocketing inflation, but the Bank of Japan remains sticking to its extremely accommodative stance. .
Japan intervened in the foreign exchange market when the dollar crossed 145 yen last September, prompting the Ministry of Finance to buy yen and push the dollar back to around 140 yen. The yen has fallen more than 9% against the dollar over the year.
With the yen trading near that level again, traders expect Japanese officials to start warning of intervention soon.
Saxo Markets strategists say this week’s Japanese gross domestic product (GDP) and consumer price index (CPI) data could be key, while U.S. data could continue to push U.S. Treasury yields higher. said.
“Traders are also keeping an eye on whether Japanese authorities can intervene, but the lack of verbal intervention so far suggests they may be patient.”
Treasury yields rose on Friday after data showed U.S. producer prices edged higher than expected in July as service costs recovered at their fastest pace in almost a year. , further pushed up.
This follows Thursday’s news that consumer prices rose modestly in July. The PPI data cast some doubt on whether the Fed has finished its rate hike cycle.
According to the CME FedWatch Tool, the market sees a nearly 89% chance that the Fed will hold rate hikes at next month’s meeting, and traders expect no further rate hikes this year.
But central bank officials say it’s too early to make that decision.
ANZ analysts said inflation data and recent labor market data point to the Fed keeping rates on hold at its September meeting, adding that nonfarm payrolls and CPI should be considered by the Fed before the meeting. He added that there would be one more piece of data.
They said US consumer resilience will be the focus of July’s release of retail sales data due to rising fuel prices and tighter credit conditions.
The dollar index against the country’s currency rose 0.078 percent to 102.94, its highest since July 7. The index rose 1% for the month.
The euro fell 0.09% to $1.0934 and the pound fell 0.14% to $1.2676 on the day.
The Australian dollar fell 0.48% to $0.647 and the kiwi fell 0.38% to $0.596. Both antipodal currencies have fallen on disappointing trade and inflation data from China, the biggest buyer of commodity exports.
Chris Weston, head of research at Pepperstone, said while sentiment toward China has been subdued, this week’s high frequency China data could trigger a strong upside reaction in the Chinese market with just a little stimulus. Ta.