Yen moves in negative zone under supervision of Japanese authorities
Yen declined on Wednesday in Asian trade against a basket of major rivals, extending losses for the third straight session against the dollar and trading below 155 yen per dollar, which boosts the likelihood of another direct intervention by Japanese authorities.
Analysts noted that any intervention by the Bank of England would only represent a temporary reprieve for the yen due to the stark difference in interest rates between Japan and the US.
Yen is also pressured by the revival of US 10-year treasury yields, which hurts the appeal of yen against the dollar.
The Price
USD/JPY rose 0.4% today to 155.27 yen, with a session-low at 154.52, after the yen marked a 0.5% loss against the dollar yesterday, the second loss in a row on profit-taking off three-week highs at 151.86.
Japanese Authorities
Bank of Japan Governor Kazuo Ueda said the BOJ will monitor the impact of yen’s movements on inflation closely.
Japan’s finance minister Shinuchi Suzuki reiterated his warnings that authorities are prepared to intervene and stem volatile movements in the forex market.
Traders believe that Japanese authorities intervened for at least two days last week to boost the yen after trading below 160 yen per dollar.
The Wall Street Journal reported the government’s intervention spanning Monday and Wednesday, with a focus on low-liquidity days to maximize effects.
Interest Rate Gap
The current US-Japan interest rate gap stands at 540 basis points in favor of the US, and such a gap will continue to offer support for the dollar.
The gap could shrink multiple times this year as the Federal Reserve prepares to ease policies.
US Yields
US 10-year treasury yields rose by 0.4 basis points today, holding ground above four-week lows at 4.420% amid attempts to rebound.
Minneapolis Fed President Neil Kashkari said on Tuesday that it remains too early to say that inflation has been definitively stopped.
Gold driven lower by dollar's strength
Gold prices fell on Tuesday as the dollar rose against most major rivals, amid ongoing uncertainty about Fed’s policies.
Recent US payrolls data showed a marked slowdown in the labor sector, which boosted the odds of multiple Fed interest rate cuts this year.
A batch of major tech companies, including Microsoft, Apple, Alphabet, and Meta, all reported strong profits and earnings in the first three months of 2024.
Otherwise, the dollar index rose 0.3% to 105.4 as of 19:58 GMT, with a session-high at 105.4, and a low at 105.03.
Gold spot prices fell 0.4% as of 19:59 GMT to $2322.30 an ounce.
US stock indices edge up, Dow Jones heads for fifth straight session
US stock indices rose marginally on Tuesday amid focus on earnings results, with optimism about the Fed’s monetary policy prospects.
Recent US payrolls data showed a marked slowdown in the labor sector, which boosted the odds of multiple Fed interest rate cuts this year.
A batch of major tech companies, including Microsoft, Apple, Alphabet, and Meta, all reported strong profits and earnings in the first three months of 2024.
On trading, Dow Jones rose 0.2%, or 65 points to 38917, while S&P 500 rose 0.2%, or 13 points to 5193, as NASDAQ added 0.2%, or 30 points to 16,379.
Dollar regains footing ahead of important Fed remarks
Dollar rose in European trade on Tuesday against a basket of major rivals, holding ground above three-week lows amid active short-covering.
Investors await a series of remarks by Fed officials later today, looking for clues on the future of US interest rates.
The current gains are stymied by a recent decline in US 10-year treasury yields to four-week lows, undermining the dollar's standing.
The Index
The dollar index rose 0.2% to 105.31 today, with a session-low at 105.03, after closing flat on Monday away from three-week lows at 104.52, plumbed earlier in the same session.
US Rates
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in June stand at 10%, while the odds of such a cut in July stand at 32%, and the odds of a similar cut in September stand at 67%.
According to the same tool, investors now expect two interest rate cuts by the Fed this year, likely in September and November.
US Yields
US 10-year treasury yields fell 0.8% today, extending losses for the fifth straight session and plumbing four-week lows at 4.453%, hurting dollar’s standing.
New York Fed President John Williams said that at some point, the Fed will cut interest rates, but refused to provide a timeline for that, however he does believe that the US economy is moving towards a better balance.