2023-06-20 01:46:04
The U.S. dollar rose broadly on Tuesday and hit a seven-month high against the yen, while the yuan fell after China cut two benchmark interest rates for the first time in a decade.
China on Tuesday cut its prime one-year and five-year interest rates by 10 basis points, as widely expected, as authorities seek to support a slowing recovery in the world’s second-largest economy.
The offshore yuan edged lower on the decision and was down more than 0.1% at 7.1734 to the dollar, languishing near last week’s seven-month low.
“The magnitude of the cut – we’re talking basis points, not percentages, so it’s not really going to shake things up,” said Rodrigo Catril, senior currency strategist at National Australia Bank (NAB ).
“What the market is really waiting for is concrete measures from the tax authorities in terms of spending.
Elsewhere, the U.S. dollar edged higher in cautious trading after a U.S. holiday on Monday kept market activity going.
The greenback hit 142.26 yen at the start of Asian trading, its highest level since November, following the Bank of Japan’s (BOJ) decision on Friday to maintain its ultra-light monetary policy.
The yen came under further pressure as interest rate differentials between Japan and other developed markets around the world widened.
“We believe that the Japanese economy is recovering strongly against other major economies and will continue to outperform going forward. But if monetary policy does not reflect this change in economic fundamentals and the BOJ maintains its dovish policy , the yen is likely to depreciate even more,” Min Joo Kang, ING’s senior economist for South Korea and Japan, said in a client note.
The Australian dollar fell 0.42% to $0.6818, after minutes from the Reserve Bank of Australia’s policy meeting this month showed the board considered leaving rates unchanged given that consumer spending was clearly slowing, but felt inflation risk had shifted to the upside.
The New Zealand dollar fell 0.12% to $0.6191, after falling more than 0.5% in the previous session.
In other currencies, the euro slipped 0.03% to $1.0917, although it remained supported by a still bullish European Central Bank after two policymakers said on Monday the bank should be reluctant to raise. its rates because the rate of inflation could be even higher than it expects.
The pound rose 0.05% to $1.2797, ahead of UK inflation data and the Bank of England’s (BoE) interest rate decision later in the week.
Markets expect the BoE to hike its interest rate by a quarter point on Thursday, which would be its 13th straight hike as the bank battles surprisingly high inflation.
“The market has continued to raise its price expectations, not only for potentially 25+ basis point delivery this week, but also for higher terminal rates,” said NAB’s Catril.
“To some extent, we think pricing has gotten a bit too aggressive compared to what we think the Bank of England needs to do.
Against a basket of currencies, the US dollar rose 0.03% to 102.51.
1687237502
#dollar #supported #yuan #falters #China #cuts #benchmark #interest #rates