Forex
Dollar dips while jawboning supports yen
![](https://letizo.com/wp-content/uploads/2024/04/dollar-dips-while-jawboning-supports-yen_660d6fa5c99cb.jpeg)
By Hannah Lang
NEW YORK (Reuters) -The U.S. dollar was down on Tuesday after earlier hitting its highest in almost five months, following a new report that showed U.S. job openings held steady at higher levels in February.
The Japanese yen was last up at 151.605 per dollar, after earlier dipping to 151.79. It has traded in a tight range since reaching a 34-year trough of 151.975 on Wednesday, which spurred Japan to step up warnings of intervention.
The rose to 105.1 on Tuesday, its highest level since Nov. 14, adding to sharp gains on Monday after U.S. data unexpectedly showed the first expansion in manufacturing since September 2022, causing traders to pare rate bets.
The dollar index last stood at 104.81, down 0.181% after a report from the Labor Department showed that job openings edged up to 8.756 million on the last day of February, slightly higher than expectations, as traders also digested a February increase in factor orders.
The Commerce Department’s Census Bureau on Tuesday said new orders for U.S.-manufactured goods rebounded more than expected in February, boosted by demand for machinery and commercial aircraft as manufacturing regains its footing.
Monday’s U.S. ISM manufacturing survey data featured a sharp rise in a measure of prices in the sector, adding to investors’ concerns that inflation will be slow to fall back to 2%, delaying the Federal Reserve’s first rate cut.
“Really the dollar over the last nine months or so has been driven by Fed policy expectations — when the probability of a cut increases sooner, the dollar tends to weaken, and vice versa,” said John Velis, Americas macro strategist at BNY Mellon (NYSE:).
Fed Chair Jerome Powell on Friday said the central bank was in no hurry to lower borrowing costs after data showed a key measure of inflation rose slightly in February.
On Tuesday, Japanese Finance Minister Shunichi Suzuki reiterated that he would not rule out any options to respond to disorderly currency moves.
Japanese authorities intervened in 2022 when the yen slid toward a 32-year low of 152 to the dollar.
The yen’s decline has come despite the Bank of Japan’s first interest rate hike since 2007 last month, with officials cautious about further tightening amid a fragile exit from decades of deflation.
“The fact that they didn’t [intervene] last week to me suggests that it’s going to take a break above 152 for Japanese policymakers to start getting involved, and in retrospect, I think maybe that’s prudent of them because intervention loses its significance each time you enter the market,” said Matt Weller, head of market research at StoneX.
Still, officials are “wary of backing themselves into a corner by drawing a line in the sand at 152,” said Nicholas Chia, Asia macro strategist at Standard Chartered (OTC:).
“The rationale of jawboning and intervening in FX markets is mainly to buy time for the JPY in the hopes that USD strength wanes and recedes,” he said.
Elsewhere, fell to a 4-1/2-month low as a strong dollar offset selling of the U.S. currency by state-owned banks. The yuan fell to a low of 7.2364 per dollar on the day, its weakest level since mid-November.
The euro fell to its lowest since mid-February at the end of the Asian session but was last up at $1.0763. Data on Tuesday showed that the euro zone factory downturn deepened again in March.
Sterling ticked up from near its lowest since December to $1.2569 after data showed its manufacturing sector brightened last month.
declined 5.36% to $66,027 after earlier declining to as low as $64,550.
The Swiss franc hit its lowest since the start of November at 0.909 to the dollar. It has dropped around 2.5% since the Swiss National Bank unexpectedly cut interest rates on March 21.
Forex
Major Russian lenders say yuan coffers empty, urge central bank action
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By Elena Fabrichnaya
MOSCOW (Reuters) – Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.
The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry’s plans for forex interventions implied that the central bank’s daily yuan sales would plunge in the coming month to the equivalent of $200 million.
The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft’s 15 billion yuan bond placement, which also sapped liquidity from the market.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.
The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients.
Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.
Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.
At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps.
“I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well.
The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB’s Kostin said that since Russia’s trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem.
Forex
Bank of America sees more downside for the dollar
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Investing,com – The US dollar has stabilized after a sharp fall in August, but Bank of America Securities sees more troubles ahead for the US currency.
At 07:20 ET (11:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.077, having largely held its course over the last week.
That said, the US currency is still down 1.6% over the month.
The dollar’s selloff last month stood out in a historical context, according to analysts at Bank of America Securities, in a note dated Sept. 5.
The greenback has since stabilized, however, despite the outsized weakness, the US bank still sees three reasons to stay bearish on the Dollar Index (DXY).
Following similar episodes of bearish DXY breakouts, the index has tended to continue its downtrend, the bank said.
In the last 3 analogs, DXY index fell on average for another 4% before reaching a bottom. Extending this analysis to bilateral USD/G10 pairs suggests a continuation of the USD downtrend is more likely vs EUR, GBP, and AUD than SEK, NOK, and CHF in G10.
While the DXY made a new year-to-date low in August, broad nominal and real USD trade-weighted indices have stayed at Q4 2022 levels and would suggest the USD remains overvalued.
The USD selloff in 2024 has been concentrated in and other European currencies, leading to DXY divergence from other USD indices.
The bank also noted US 10y Treasury yield’s tendency to fall after the first Federal Reserve cut, while global financial conditions are set to loosen further.
“USD may see more weakness as other central banks, particularly the ones that cut policy rates ahead of the Fed, can now afford to let the Fed do some of their work and indirectly support global economies outside of the US,” BoA added.
Forex
Dollar’s demise appears overstated – JPMorgan
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Investing.com – The US dollar has had a difficult summer, dropping substantially during the month of August, but JPMorgan thinks those predicting the demise of the U.S. currency are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.127, having lost 1.6% over the course of the last month.
“Diversification away from the dollar is a growing trend,” said analysts at JPMorgan, in a note dated Sept. 4, “but we find that the factors that support dollar dominance remain well-entrenched and structural in nature.”
The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency, the bank added.
Additionally, the genuine confidence of the private sector in the dollar as a store of value seems uncontested, and the dollar remains the most widely used currency across a variety of metrics.
That said, “we are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The more important and underappreciated risk, the bank added, is the increased focus on payments autonomy and the desire to develop alternative financial systems and payments mechanisms that do not rely on the US dollar.
“De-dollarization risks appear exaggerated, but cross-border flows are dramatically transforming within trading blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.
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