May 7 2024: The U.S. dollar maintained stability on Tuesday, while the yen recovered slightly after warnings from Japanese officials following suspected dollar-selling interventions last week.
The Australian dollar retreated from its recent high against the U.S. dollar after the Reserve Bank of Australia (RBA) refrained from signaling a more hawkish stance, contrary to market expectations.
The U.S. dollar index, which gauges the dollar against major currencies like the yen, pound, and euro, edged up by less than 0.1% to 105.23, rebounding from Friday’s low of 104.52.
Despite a 4% gain this year, the index dipped nearly 1% last week due to the Federal Reserve’s decision to hold rates and indications of softness in the U.S. labor market.
Kirstine Kundby-Nielsen, an FX analyst at Danske Bank, expressed optimism about the U.S. macro outlook supporting the dollar in the coming months.
Against the yen, the dollar rose marginally to 154.06 after touching 154.60 earlier, recovering from Friday’s low of 151.86 spurred by weak U.S. jobs data and suspected Japanese intervention.
Masato Kanda, Japan’s top currency diplomat, reiterated the government’s stance on orderly market behavior but didn’t confirm intervention.
The carry trade remains appealing due to expectations of a delayed Federal Reserve rate cut and cautious Bank of Japan tightening, maintaining a significant yield gap between Japanese and U.S. yields.
The Australian dollar dipped post-RBA decision as rates remained unchanged and the bank refrained from a more hawkish stance due to inflation trends.
Governor Michele Bullock indicated that current monetary policy aims to steer inflation to target levels without requiring further rate adjustments.
The euro and sterling also saw minor declines ahead of the Bank of England’s policy announcement later in the week.
Overall, market sentiment remains cautious amid global central bank actions and economic data shifts.