The dollar remained strong on Thursday, reaching a near three-week high, as Treasury yields increased and demand for riskier currencies diminished. Meanwhile, the yen experienced a brief surge after breaching 150 per dollar, causing concern among traders about potential intervention.
The Japanese yen weakened to its lowest level in a year, hitting 150.78 per dollar. While this is not far off from the 32-year low of 151.94 it reached in October 2021, which prompted Japanese authorities to intervene in the currency market, analysts believe the current movement is unlikely to be intervention.
Niels Christensen, Chief Analyst at Nordea, stated, “The move was less than one big figure. That tells me it wasn’t intervention. If it had been intervention, we would have seen a bigger move.”
Japanese Finance Minister Shunichi Suzuki warned traders against selling the yen again and stated that authorities were closely monitoring the situation. However, he did not directly comment on the possibility of intervention.
The Bank of Japan is facing increasing pressure to adjust its bond yield control due to a recent surge in global interest rates. Sources told Reuters that discussions were held about raising an existing yield cap set three months ago. Japan’s low yields have made the yen an attractive target for short-sellers and funding trades, resulting in persistent weakness.
Since the US Federal Reserve began rapidly raising rates in March 2022 to tackle inflation, the yen has fallen over 20 percent. In contrast, the Bank of Japan has maintained its ultra-loose monetary policy, making it an outlier among central banks.
Currency strategist Carol Kong from Commonwealth Bank of Australia emphasized that the US GDP data due later in the day is a significant risk event for the dollar-yen exchange rate. A strong report may increase pressure on US yields and potentially push the yen to new lows.
The European Central Bank (ECB) is expected to keep interest rates unchanged at a record high, ending a 15-month streak of rate hikes. However, it may discuss a faster reduction of its large portfolio of government debt as it battles excessive inflation. Analysts predict that the ECB will adopt a more cautious stance.
The pound sterling saw a decline of 0.2 percent on the day, reaching a three-week low of $1.2070 before settling at $1.2081. The dollar, on the other hand, rose by 0.3 percent against a basket of currencies to 106.83, reaching a near three-week peak of 106.88.
The Australian dollar slid to a one-year low of $0.6271 and ended the day down 0.1 percent at $0.6302 due to expectations of a further interest rate hike following a surprisingly high reading for inflation.
The New Zealand dollar also touched a near one-year low of $0.5774 before remaining unchanged at $0.5802.
The Canadian dollar fell by 0.1 percent against the greenback to 1.3811 per U.S. dollar after the Bank of Canada held its key overnight rate at 5.0 percent, as expected. However, it left the possibility of further rate hikes open to curb inflation.
The Federal Reserve and the Bank of Japan are scheduled to meet next week.
In the world of cryptocurrencies, bitcoin fell by 1 percent to $34,155. This week, the largest cryptocurrency has surged by 14 percent due to speculation of an imminent exchange-traded bitcoin fund.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )