2024-03-25 19:28:03
The yen was little changed on Monday, giving up earlier gains after Japan’s top diplomat warned against speculators trying to weaken the currency, while the dollar index fell from a one-month high reached Friday.
Masato Kanda, Japan’s deputy finance minister for international affairs, said the weakness in Japan’s currency did not reflect fundamentals, in the latest warning about the currency’s “great fall” against the dollar.
It clearly puts traders on alert for signs of intervention, said Karl Schamotta, chief market strategist at Corpay in Toronto.
However, the yen was not able to maintain its gains for long.
The dollar was up 0.03% on the day at 151.47 yen, just below a four-month high of 151.86 hit Friday. The Japanese currency is trading near its lowest levels in three decades, having reached 151.94 per dollar in October 2022, which was then its weakest level in 32 years.
Traders are watching the level around 152 for signs of possible intervention, although Schamotta noted that the government may not intervene unless volatility increases, adding that this factor could be more important than the exchange rate .
Implied volatility continues to fall in most major currencies, providing a favorable environment for carry trading – we should continue to see speculators borrowing from the yen and other low yielding securities, and investing in high yielding securities. emerging market yield, he said, which could continue to put downward pressure on the yen.
The Japanese currency fell despite the Bank of Japan’s interest rate hike last week.
China’s yuan rose in the offshore market to 7.2525, supported by reported selling of dollars by state banks and a strong official guidance set by the country’s central bank.
The yuan fell to its lowest level in four months at 7.2810. China’s currency has come under pressure from growing market expectations for further monetary easing to support the world’s second-largest economy.
The dollar index fell 0.19% to 104.23, after hitting 104.49 on Friday, its highest level since February 16.
Federal Reserve Chairman Jerome Powell said last week that the U.S. central bank remained on track to cut rates this year, despite stronger-than-expected inflation in January and February.
Some Fed officials, including Atlanta Fed President Raphael Bostic, however, expressed concern about persistent inflation and stronger-than-expected economic data. Mr. Bostic said Friday that he expects only one quarter-point interest rate cut this year, instead of the two he had predicted.
Fed officials said Monday they were confident U.S. inflation would decline, but acknowledged they were becoming increasingly cautious in the debate.
The Personal Consumption Expenditures (PCE) Price Index for February, due Friday, is the next important release for additional clues on Fed policy. The data will be released while other markets, including stocks and bonds, are closed for Good Friday, which could reduce trading volumes in the foreign exchange market.
Data on Monday showed sales of new U.S. single-family homes fell unexpectedly in February after mortgage rates rose during the month.
The euro rose 0.27% to $1.0834. The pound sterling strengthened by 0.29% to $1.2635.
Bets on a June rate cut by the European Central Bank and the Bank of England (BoE) have risen sharply after the Swiss National Bank became the first major central bank to cut borrowing costs last week and that BoE Governor Andrew Bailey told the Financial Times that rate cuts “were in play” this year.
Elsewhere, the Australian dollar gained 0.37% against the US dollar to $0.654.
Bitcoin rose more than 6% to $70,987.49, its highest level since March 15. It remains below the record high of $73,803.25 reached on March 14.
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