Dollar set to eke out weekly gain as traders weigh US rates, yen wobbles
2024.07.18 22:00
By Ankur Banerjee
SINGAPORE (Reuters) – The dollar was steady and poised to snap a two-week losing run on Friday as U.S. labour and manufacturing data kept traders pondering on when and by how much the Federal Reserve would cut rates this year.
The yen wobbled at 157.24 per dollar after touching a six-week high of 155.375 on Thursday in the wake of suspected interventions by Tokyo last week that could total nearly 6 trillion yen, according to data from Bank of Japan.
Data on Friday showed core consumer prices in Japan accelerated for a second straight month in June, keeping alive market expectations that the central bank could soon raise interest rates.
The BOJ exited negative rates and bond yield control in March, in a shift away from a decade-long radical stimulus programme, with markets warming to the idea of a rate hike in its meeting at the end of the month. Traders are pricing in a 41% chance of a 10 basis point hike.
The yen is down over 10% against the dollar this year, weighed down by the wide difference in interest rates between the U.S. and Japan and languished around 38-year lows at the beginning of the month, spurring suspected moves by Tokyo.
On the U.S. front, the number of Americans filing new applications for unemployment benefits rose more than expected last week, though there was no material shift in the labour market.
The , which measures the U.S. currency against six rivals, was at 104.21, up from a four-month low of 103.64 it touched on Wednesday. The index is set for a 0.16% gain for the week after two weeks of losses.
The Federal Reserve is scheduled to meet at the end of July where markets anticipate a very low chance of the central bank cutting rates. Traders though are fully pricing in a 25 basis points of easing for the Fed’s September meeting.
Ryan Brandham, head of global capital markets for North America at Validus Risk Management, said the U.S. economy is getting closer to where a rate cut may be appropriate.
“But caution by the Fed and moving slowly is likely warranted for fear of reigniting inflation that they worked so hard to get under control,” he said.
Federal Reserve Bank of San Francisco President Mary Daly said on Thursday she is looking for more confidence that inflation is moving back to the Fed’s 2% target before calling for an interest rate cut.
“We don’t have price stability right now,” Daly said at a Dallas Fed event.
The euro was little changed at $1.0893 in early Asian hours after a 0.4% drop in the previous session as the European Central Bank kept rates steady and gave no insight into its next move.
The single currency had touched a four-month high of $1.0947 on Wednesday, recouping all the losses of the past few weeks when it came under pressure from uncertainty about the French election.
With money markets pricing in more than two rate cuts from the Fed by year-end and just under two for the ECB, the euro could be in the driving seat for the rest of the year.
Sterling was last flat at 1.2942 after a 0.5% slide in the previous session as data showed wages in Britain grew at a slower pace, but was still strong enough to keep doubts about a rate cut from the Bank of England afloat.
The pound touched a one-year on Wednesday and is up 1.7% for the year.
In other currencies, the Australian dollar eased 0.11% to $0.66985, while the New Zealand dollar was 0.22% lower at $0.6032.
