Apr 16 2024: The dollar surged to a five-month high against the pound and euro on Tuesday, driven by robust U.S. retail sales data that raised concerns of potential intervention by Japan as the yen remained at its lowest levels since 1990.
Strong U.S. retail sales figures, showing a 0.7% increase last month compared to a forecasted 0.3% rise, reinforced expectations that the Federal Reserve would not rush into cutting interest rates this year. Kenneth Broux from Societe Generale noted the solid growth of the U.S. economy, supporting higher bond yields and countering expectations of Fed rate cuts.
The euro weakened to $1.0615, its lowest since November, following signals from the European Central Bank about a potential rate cut in June. Sterling also dropped to $1.2438, hitting a five-month low.
The U.S. dollar index rose to 106.43, its highest since November, reflecting the overall strength of the dollar against major currencies.
Investors are closely monitoring Federal Reserve Chair Jerome Powell’s comments scheduled for later on Tuesday, particularly after last week’s hotter-than-expected U.S. inflation data.
The yen remained at around 154.45 per dollar, near its 34-year lows, prompting concerns about potential yen-buying intervention by Japanese authorities. Japanese Finance Minister Shunichi Suzuki indicated a close watch on currency movements and readiness to respond as necessary.
The challenging environment for Asian currencies persists, with hedge funds heavily betting against the yen. Despite the potential for intervention, sustained trends are difficult to reverse, especially amid rising U.S. bond yields.
The Chinese yuan experienced marginal losses despite positive GDP data for China’s first quarter, highlighting broader pressures on emerging market currencies. Other currencies in Asia, such as the Australian dollar, also faced downward pressure, reflecting broader market dynamics and investor sentiment.
