Home ForexArticles Dollar falls after weak data and yen hurt by BOJ caution By Reuters

Dollar falls after weak data and yen hurt by BOJ caution By Reuters

by SuperiorInvest

© Reuters. FILE PHOTO: A U.S. dollar bill is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) – The dollar fell against the euro on Friday on weaker-than-expected U.S. economic data, but gained against the Japanese yen after Bank of Japan (BOJ) Governor Kazuo Ueda said it was too early to claim victory over inflation.

In cryptocurrencies, bitcoin remained just below the more than two-year high reached on Wednesday.

The U.S. manufacturing sector fell further in February, with a measure of factory employment falling to its lowest level in seven months amid a decline in new orders. Construction spending, which was expected to increase, also fell in January.

Economists at Goldman Sachs lowered their first-quarter gross domestic product (GDP) estimate by 0.2 percentage points to 2.2% after the data.

The dollar has remained largely rangebound and traders are closely focusing on economic data for new clues on when the US Federal Reserve is likely to start cutting interest rates.

Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, noted that “the United States is the key side,” in terms of driving currency movements. The dollar looked like it was going to rise in recent days, but it failed after Friday's drop, he added.

The dollar was also dragged lower in line with short-term Treasury yields on Friday after Fed Governor Chris Waller said he would like to see the US central bank address a balance reset toward shorter-term Treasury bills that better align with short-term rates. long-term monetary policy rate that the Federal Reserve controls as its key monetary policy tool.

The next major economic release from the United States will be the February employment report due out next Friday.

It fell 0.23% to 103.87. The euro gained 0.31% to $1.0837.

Data on Friday showed euro zone inflation fell last month but underlying price growth remained stubbornly high, adding to the case for the European Central Bank to keep interest rates at record levels. for a little longer before starting to relax its policy towards the middle of the year.

The euro zone currency has traded within a range of $1.07 to $1.11 since November as investors struggle to determine when the ECB and the Federal Reserve will begin cutting rates.

“We are looking for new news,” said Jane Foley, head of foreign exchange strategy at Rabobank, “whether it comes from the ECB (European Central Bank) and a change in expectations, or from a further alteration of the market's view on the ability of the Federal Reserve to cut even in June.”

JAPANESE INFLATION IN FOCUS The dollar rose against the yen after the BOJ's Ueda said it was too early to conclude inflation was close to sustainably reaching the central bank's 2% inflation target and stressed the need to Examine more data on salary prospects.

This reversed a move taken on Thursday, when BOJ board member Hajime Takata said the central bank should consider a review of its ultra-loose monetary policy, including an exit from negative interest rates and reining in loan yields. the bonds.

Inflation expectations and the BOJ's policy direction will likely depend on negotiations between big business and unions over wage increases.

“If we are right to expect the wage negotiations to lead to more signs that inflation is becoming a little more persistent in Japan, then we expect the BOJ to abandon its negative interest rate policy,” said Bipan Rai, head of foreign exchange. from North America. strategy at CIBC Capital in Toronto.

However, “I feel like it's already included in the price,” Rai added. “Beyond that, we're really looking at what kind of adjustments they make to the yield curve control program.”

Big companies will close negotiations on next year's wages with unions on March 13, ahead of the BOJ policy meeting on March 18-19.

The dollar was last up 0.09% at 150.10 yen.

The pound rose 0.26% to $1.2655.

Bank of England (BoE) chief economist Huw Pill said on Friday he thought the time for a first interest rate cut by the central bank since the coronavirus pandemic was still “a little ways off”.

It was last up 1.4% at $62,320, after hitting $63,933 on Wednesday, the highest level since November 2021.

Source Link

Related Posts