Sep 28, 2023: The dollar clung close to a 10-month high against a basket of its peers on Thursday, keeping the yen near a key intervention zone as investors size up upbeat U.S. economic data and fresh comments from Federal Reserve officials.
As the dollar held firm, the euro and sterling struggled to pick up much from new multi-month-lows hit on Wednesday.
The Australian and New Zealand dollars pared losses, shrugging off retail sales data from Australia that came in weaker than expected.
Federal Reserve Bank of Minneapolis President Neel Kashkari was one among several Fed voices to caution markets on the possibility of more hikes, saying on Wednesday that ample evidence of ongoing economic strength meant that more tightening might be in the pipeline.
Fed Chair Jerome Powell is scheduled to speak later on Thursday, which could give markets further clues on the path of U.S. monetary policy.
Economic data out of the U.S. continues to surprise with its strength, defying investor expectations for a slowdown.
“Despite fears earlier this year that the U.S. could fall into recession, we are probably seeing a reacceleration in economic activity,” which is also propelling U.S. yields up, said Kyle Rodda, senior financial market analyst at Capital.com.
The U.S. dollar index, which measures the greenback against a basket of other major currencies, last stood at 106.70, hovering near an overnight peak of 106.84, the highest level since Nov. 30.
U.S. benchmark 10-year yields hit a fresh 16-year high of 4.462% overnight.
The yen , which tends to be sensitive to changes in long-term U.S. Treasury yields, was off Wednesday’s new 11-month low of 149.71, but remained too close to the psychological level of 150 per dollar for comfort. It last sat down around 0.2% at 149.38.
The Japanese currency has also been squeezed by a surge in oil prices, which on Wednesday marked their highest settlement in 2023 after a steep drop in U.S. crude stocks compounded worries of tight global supplies.
The 150 zone is seen by markets as a line in the sand for Japanese authorities that could spur intervention as it did last year.
“If the MOF is serious about intervening to support the free-falling yen, which we think they are, then a response (intervention) is likely not too far away,” said Tony Sycamore, market analyst at IG, in a note.
Finance Minister Shunichi Suzuki said on Thursday that Japan will not rule out any options if there is any excessive volatility in currency moves, warning against speculative yen moves amid the yen’s fall.
Elsewhere, the euro was mostly flat but held above Wednesday’s 8-month low of $1.04880 as investors awaited key inflation data due on Friday from the bloc. Sterling GBP=D3 stood at $1.2137 per dollar, just off its lowest level since March 17.
The Aussie, which touched a 10-month low overnight, and Kiwi both rose about 0.3% higher against the greenback, paring some losses as markets largely ignored Australian retail sales data that came in below estimates earlier in the day.
Source Courtesy: Reuters/Investing.com