Home ForexArticles Dollar gains as inflation data looms; yen under intervention watch By Reuters

Dollar gains as inflation data looms; yen under intervention watch By Reuters

by SuperiorInvest

By Brigid Riley and Alun John

TOKYO/LONDON (Reuters) – The dollar gained against the euro and pound on Thursday after a U.S. Federal Reserve policymaker said he was in no rush to cut rates, as traders braced for data. key economics and were hesitant to take action on the yen. for fear of Japanese intervention.

The Japanese currency held steady at 151.42 per dollar after trading just below the 152 mark, its lowest level since 1990, on Wednesday before Japan's top monetary officials suggested they were ready to intervene to avoid new falls.

The euro was down 0.33% at $1.0792, its lowest level in five weeks, and the pound was down 0.25% at $1.2609. That left it up 0.16% at 104.6, its highest level since mid-February.

Speaking during the final hours of US trading on Wednesday, Fed Governor Christopher Waller said recent disappointing inflation data confirms the case for the US central bank to delay tapering. your short-term interest rate target.

Market expectations that the first rate cut will come at the Federal Reserve's June meeting have eased somewhat. Current prices have a 60% probability, compared to 67% at this time last week, according to the CME FedWatch tool.

“Waller is one of the Fed's most senior policymakers and while I don't see this as a big move, the comments have given some momentum to the market that has been stuck in very tight trading ranges,” said Lee Hardman, senior Fed official. Currency strategist at MUFG.

Traders now await the US core PCE inflation figures due out on Friday, as well as an appearance by Federal Reserve Chairman Jerome Powell.

INTERVENTION SURVEILLANCE

If inflation data surprises to the upside and supports the dollar, its most dramatic impact could hit the yen. Market participants say there is a dense tangle of options restricting dollar/yen moves around the 152 level, so a breakout could trigger more significant moves.

While there may be some trading to defend a move toward 152 yen per dollar for now, Friday's U.S. inflation data posed a significant risk, said Takeshi Ishida, currency strategist at Resona Holdings.

“Once dollar/yen touches 152, I think there will probably be a strong move higher, and that's when intervention could take place.”

Japanese authorities held a meeting Wednesday on currency weakness and increased their verbal warnings, putting the market on alert for any signs that words are being backed by actions.

Japan intervened in the currency market three times in 2022, selling dollars to buy yen, first in September and again in October, when the yen fell to a 32-year low of 152 per dollar.

A summary of views from the Bank of Japan's March meeting released on Thursday gave little support to the currency, showing that many policymakers saw the need to go slowly in phasing out ultra-loose monetary policy.

The Easter holidays in many markets also complicate things.

“That works in Japan's favor as it maintains another layer of uncertainty as liquidity tends to be tight, so investors could be nervous about holding short yen positions heading into the holiday period,” said Hardman of Japan. MUFG.

Meanwhile, China's central bank pegged the yuan at the widest gap from the Reuters estimate in nearly five months, as authorities step up efforts to prevent sharp declines in the currency. The yuan fell last Friday to its lowest level in four months. [CNY/]

The price remained practically stable at 7.2277 per dollar, while abroad it remained at 7.2591 per dollar, and it did not change much either.

The Swiss franc remained under pressure and the dollar rose 0.24% to 0.9059 francs, trading just below the four-month high reached the previous day.

It fell 0.6% to $0.6495. In addition to being hurt by Waller's comments, data from Australia showed that consumers continued to struggle, as retail sales rose 0.3% in February, missing forecasts. [AUD/]

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