Forex
Dollar slips as US job growth slows in June, yen jumps
© Reuters. A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration
By Herbert Lash and Amanda Cooper
NEW YORK/LONDON (Reuters) -The dollar slumped on Friday after signs of a less resilient U.S. labor market reduced the outlook for how long the Federal Reserves will keep interest rates higher, while the yen surged on concerns the 10-year Treasury’s yield rose above 4%.
The U.S. economy added the fewest jobs in 2-1/2 years in June, the Labor Department said in an employment report that also showed 110,000 fewer jobs were created in April and May than earlier reported.
A jump in the number of people working part-time for economic reasons also suggested a weaker labor market, but the pace of job growth remains strong and with inflation still double the Fed’s target rate, a rate hike this month is likely.
Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said markets are looking at next week’s release of the Consumer Price Index (CPI), which could show inflation slowing to 3.1%. That would reduce the likelihood of another rate hike by the Fed after one expected in late July.
“This is a inflection point,” he said. “The dollar’s rally in the second half of June was a counter-trend correction and the dollar’s underlying downtrend that began last September-October will resume.”
The yen rose 1.37% to 142.13, a two-week high against the U.S. currency, as the rise in 10-year Treasury’s yield above 4% heightened market concerns that Japan might intervene in currency markets, said Joe Manimbo, senior market analyst.
“Risk aversion being a dominant theme this week, coupled with dollar-yen hanging around these elevated levels, has the market nervous that Japan may be edging closer to jumping back in and intervening in support of the yen,” he said.
“We’re still in striking distance of 145, which appears to be the line in the sand, with Treasury yields – the 10-year in particular keeping above 4% – that’s a sign that any moves to the downside in dollar-yen may prove very limited.”
The fell 0.776% at 102.280, while the euro was up 0.72% to $1.0964.
The dollar and other major currencies, with the exception of Japan’s yen, are in a tight trading range as most central banks are engaged in tightening monetary policy to fight inflation. Strong U.S. economic data on Thursday pushed short-dated Treasury yields to their highest since 2007, reflecting the view that the Fed is likely to raise rates by 25 basis points when it concludes a two-day policy meeting on July 26.
After the jobs data, futures pointed to an 88.8% probability that the Fed hikes in three weeks.
Earlier, the Japanese labor ministry reported regular wages posted their largest annual increase in May since early 1995, reinforcing the view that the Bank of Japan (BOJ) will have to modify its ultra-loose monetary policy sooner rather than later. “The stronger wage negotiations are starting to feed through, which is what the BOJ wants. They’ve said very clearly that if they see evidence of more sustained, stronger wage growth that could give them more confidence that they can beat their inflation target and then look obviously to moving away from loose policy settings,” MUFG strategist Lee Hardman said.
Adding a tailwind to the rally in the yen was some position-squaring among speculators, who have built up sizeable bearish positions, Hardman said. YEN BEARS, BEWARE Weekly data from the U.S. regulator shows speculators hold a short position in the yen worth $9.793 billion, the largest since May 2022, having almost doubled in size in the last three months alone. The yen has held just below the 145 level – which prompted the BOJ’s first intervention in decades last autumn – for about two weeks and authorities have made clear they are concerned about the weakness in the currency. The Australian dollar rose 0.8% to $0.6681, but it is still battered by weak Chinese economic data and broad risk aversion. The fell 0.4% at 7.2257.
Currency bid prices at 3:46 p.m. (1946 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 102.2800 103.0900 -0.78% -1.169% +103.1900 +102.2200
Euro/Dollar $1.0966 $1.0892 +0.67% +2.34% +$1.0973 +$1.0867
Dollar/Yen 142.1200 144.0600 -1.34% +8.40% +144.1900 +142.0850
Euro/Yen 155.85 156.87 -0.65% +11.08% +156.9300 +155.3900
Dollar/Swiss 0.8889 0.8954 -0.72% -3.86% +0.8969 +0.8879
Sterling/Dollar $1.2833 $1.2740 +0.74% +6.12% +$1.2849 +$1.2727
Dollar/Canadian 1.3277 1.3369 -0.72% -2.04% +1.3386 +1.3266
Aussie/Dollar $0.6688 $0.6626 +0.95% -1.88% +$0.6701 +$0.6620
Euro/Swiss 0.9747 0.9749 -0.02% -1.50% +0.9760 +0.9737
Euro/Sterling 0.8542 0.8547 -0.06% -3.41% +0.8554 +0.8526
NZ Dollar/Dollar $0.6208 $0.6158 +0.87% -2.18% +$0.6219 +$0.6156
Dollar/Norway 10.6160 10.7690 -1.46% +8.13% +10.7750 +10.6110
Euro/Norway 11.6465 11.7212 -0.64% +10.99% +11.7360 +11.6210
Dollar/Sweden 10.8345 10.9232 -0.21% +4.10% +10.9653 +10.8260
Euro/Sweden 11.8812 11.9058 -0.21% +6.56% +11.9508 +11.8655
Investing.com– Most Asian currencies firmed on Wednesday, while the dollar retreated as markets positioned for a widely expected interest rate cut by the Federal Reserve later in the day.
Market holidays in Hong Kong and South Korea limited overall volumes, while the Chinese yuan weakened as onshore trade resumed after an extended break.
The Japanese yen was the best performer in Asia as it rebounded sharply from some overnight losses against the greenback. The yen remained in sight of 2024 peaks hit earlier this week, with a Bank of Japan meeting on tap later this week.
Dollar muted, Fed rate cut in focus
The and both fell 0.1% each in Asian trade before the conclusion of a two-day later in the day.
The greenback found some strength on Tuesday after stronger-than-expected data, although it still retained most of its recent losses.
The dollar was pressured chiefly by expectations that the Fed will enact its first interest rate cut in over four years on Wednesday, likely signaling the start of an easing cycle that could see rates fall by at least 100 basis points by the end of 2024.
But markets were somewhat split over just by how much the Fed will cut rates. Traders were seen pricing in a 64% chance for a 50 basis point cut and a 36% chance for a 25 bps cut, showed.
Recent signs of resilience in the U.S. economy- as seen with strong retail sales and inflation data- could give the Fed less impetus to cut rates sharply. But on the other hand, recent signs of weakness in the labor market could push the Fed into enacting deeper cuts.
Still, the prospect of lower rates bodes well for high-yielding, high-risk currencies in Asia, and is likely to spur capital flows into the sector in the coming months.
Japanese yen strong, BOJ in focus
The Japanese yen was the best performer in Asian trade, as it recovered from losses logged on Tuesday. The pair fell 0.7% to 141.36 yen, remaining in sight of an over nine-month low hit earlier this week.
The yen was buoyed by expectations that the BOJ will strike a hawkish note when it , although analysts are uncertain whether it will hike interest rates again.
Still, a slew of BOJ officials signaled plans to raise rates further in tandem with higher inflation.
Japanese is also due on Friday.
Broader Asian currencies drifted higher in anticipation of the Fed decision. The Australian dollar’s pair rose 0.1%, while the Singapore dollar’s pair fell 0.2%.
The Chinese yuan’s pair rose 0.1% as onshore trade resumed after a long weekend, with sentiment towards China pressured by a string of weak economic readings for August.
The Indian rupee’s pair hovered around 83.773 rupees, having pulled back further from record highs hit earlier in September.
By Chibuike Oguh
NEW YORK (Reuters) -The U.S. dollar strengthened against most major currencies on Tuesday following better-than-expected retail sales data that seemed to support a less aggressive stance by the Federal Reserve, which is widely expected to deliver its first interest rate cut in more than four years.
Commerce Department data showed on Tuesday that U.S. retail sales unexpectedly rose 0.1% in August, suggesting that the economy remained on solid footing through much of the third quarter.
The Fed’s Federal Open Market Committee will give its interest rate decision at the conclusion of its meeting on Wednesday after which Chair Jerome Powell will hold a press conference. The last Fed rate cut was in March 2020 during the COVID-19 pandemic.
“I think like all the markets at this point are hostage to this FOMC meeting tomorrow,” said Marvin Loh, senior global market strategist at State Street (NYSE:) in Boston.
“Retail sales were okay. It certainly doesn’t show that there should be an imminent rush to have supersized cuts and it would be somewhat unprecedented for the Fed to really panic in rate cuts given where the market is at this point.”
Against the yen, the dollar rose 0.87% to 141.830 after initially weakening following the retail sales data.
The euro was down 0.10% to $1.112125, not far from the year’s high of $1.1201. Against the Swiss franc, the dollar was up 0.15% to 0.8460.
The , which measures the greenback against a basket of currencies including the yen and the euro, gained 0.199% at 100.90.
Fed funds futures show the chance of a 50 basis point rate cut stood at 63%, against 30% a week ago, while the chances of a 25 basis point cut was at 37%. The odds have narrowed sharply after media reports revived the prospect of a more aggressive easing.
Other economic data on Wednesday appeared to provide support for the Fed to be less aggressive in cutting rates. U.S. business inventories, a key component of gross domestic product, posted a better-than-expected gain of 0.3% in July while factory output rebounded in August.
“Overall, the market is pricing in numerous rate cuts over the next several months and there are those voices that suggest that maybe the market has gotten ahead of itself,” said Axel Merk, president and chief investment officer at Merk Investments in Pal Alto, California.
The Bank of Japan is expected to keep policy steady on Friday but signal that further interest rate hikes are coming, perhaps turning the next meeting in October into a live one.
The Bank of England is also expected to retain interest rates at 5% when it meets on Thursday, although markets have priced in a nearly 36% chance of another cut.
Sterling – the best performing G10 currency this year with a 3.41% rise on the dollar – has risen thanks to signs of resilience in Britain’s economy and stickiness in inflation. It was last down 0.37% at $1.31665.
Chinese markets are closed for the Mid-Autumn Festival break until Wednesday, though the yuan was up 0.16% at 7.1090 in offshore trade.
The Canadian dollar was up 0.04% at $1.35935. The Australian and New Zealand dollars bought $0.67595 and $0.61900 respectively.
In cryptocurrencies, bitcoin gained 5.00% to $60,544.00. rose 3.29% to $2,349.00.
Currency bid prices at 17
September 06:54 p.m. GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 100.91 100.7 0.21% -0.45% 101 100.56
Euro/Dollar 1.1121 1.1133 -0.11% 0.75% $1.1146 $1.1111
Dollar/Yen 141.87 140.59 0.91% 0.59% 141.93 140.36
Euro/Yen 1.1121 156.53 0.79% 1.38% 157.87 156.06
Dollar/Swiss 0.8461 0.8449 0.15% 0.53% 0.8478 0.843
Sterling/Dollar 1.3163 1.3216 -0.4% 3.44% $1.3229 $1.3147
Dollar/Canadian 1.3593 1.3587 0.06% 2.55% 1.3617 1.3581
Aussie/Dollar 0.6756 0.6752 0.07% -0.9% $0.6769 $0.6742
Euro/Swiss 0.9409 0.9403 0.06% 1.32% 0.9422 0.9383
Euro/Sterling 0.8447 0.8423 0.28% -2.55% 0.8454 0.8419
NZ Dollar/Dollar 0.6186 0.6201 -0.21% -2.07% $0.6211 0.6179
Dollar/Norway 10.5965 10.5865 0.09% 4.55% 10.623 10.5601
Euro/Norway 11.7859 11.786 0% 5.01% 11.8099 11.7553
Dollar/Sweden 10.1823 10.1687 0.13% 1.15% 10.2075 10.1504
Euro/Sweden 11.3252 11.322 0.03% 1.8% 11.3465 11.306
Investing.com – The U.S. dollar has been hit hard by expectations that the Federal Reserve will start its rate-cutting cycle this week with a hefty 50 basis-point reduction, but this raises the possibility of a bounce should a smaller cut occur, according to Morgan Stanley.
The U.S. central bank starts its latest policy-setting meeting later in the session, amid growing expectations that the will cut interest rates by a hefty 50 basis points at the conclusion of a meeting on Wednesday.
Traders are pricing in a 68% chance for a 50 bps cut and a 32% chance for a 25 bps cut, CME Fedwatch showed.
This has resulted in the U.S. dollar falling to its lowest levels this year.
“Our U.S. economists remain unconvinced that a 50bp cut is likely,” said analysts at Morgan Stanley, in a note dated Sept. 16. “They expect an unanimous decision to cut rates by 25bp, with the dot plot shifting down to show a total of 75bp worth of rate cuts by the end of 2024, versus market pricing of ~115-120bp.”
The bank’s US economists also “do not expect the Chair to give specific guidance of the pace of the cutting cycle … and likely remain data dependent, indicating that future decisions will be a function of the available data.”
This outcome suggests that the Fed may not believe that the currently available data warrant a pace of easing any faster than 25bp per meeting.
“That interpretation will likely push USD up broadly in the short term, immediately after the meeting,” the bank added.
However, beyond the knee-jerk reaction, we could see a split in USD performance, with the heading lower but USD heading up versus emerging market and commodity currencies.
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