SINGAPORE : The dollar was set for its fourth straight week of gains as investors braced for U.S. interest rates to be higher for longer, while the yen was volatile, with incoming Bank of Japan Governor Kazuo Ueda saying it was appropriate to keep ultra-loose monetary policy.
Data overnight showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, underscoring a still-tight labour market and a resilient U.S. economy.
Strong U.S. economic data and hawkish rhetoric from Fed officials this month have resulted in the dollar erasing its year to date losses as investors digest the prospect of the Fed staying on its monetary tightening path for longer.
The dollar index, which measures the U.S. currency against six other rivals, was at 104.54 on Friday, hovering around the near seven-week high of 104.78 it touched on Thursday.
The index is now up 2.5 per cent for the month.
Rodrigo Catril, senior currency strategist at National Australia Bank, said the jobless claims data continues to suggest the U.S. labour market remains in rude health.
“The conclusion from the U.S. overnight data is that the Fed still has more work to do.”
The market is pricing U.S. rates to peak in July at 5.34 per cent and remain above 5 per cent till the end of the year, having walked back expectations of a deep rate cut this year.
Investors’ attention will be firmly the U.S. personal consumption expenditures price index for January, the Fed’s preferred inflation measure. The index, due to be released later on Friday, is expected to be up 0.4 per cent on a month-on-month basis.
Meanwhile, the euro was up 0.04 per cent at $1.0599 and was set to end the week nearly 1 per cent lower. Sterling was last trading at $1.2018, up 0.04 per cent.
The Australian dollar rose 0.10 per cent to $0.681. The kiwi advanced 0.06 per cent to $0.623.
UEDA HEARING
Incoming BOJ chief Ueda, who was nominated earlier this month in a surprise move, took the centre stage in early Asian hours as he spoke at the lower house confirmation hearing.
Ueda warned that uncertainties regarding Japan’s economic recovery remained “very high”, warranting the BOJ maintaining its ultra-loose monetary policy.
The yen was volatile through the day and swung between gains and losses against the dollar. The Asian currency strengthened 0.03 per cent to 134.68 per dollar.
“His neutral comments, coming against market’s hawkish expectations and together with the rising global yields, suggest the yen could embark on a weakening trend again once we are past this volatility,” said Charu Chanana, market strategist at Saxo Markets in Singapore.
Japan’s core consumer inflation hit a fresh 41-year high in January, according to data on Friday, putting renewed pressure on the central bank to phase out its massive stimulus programme.
The surprise choice of Ueda as the next BOJ governor stoked expectations that the end to the unpopular yield curve control (YCC) policy was around the corner.
Analysts said Ueda’s comments were not a surprise, noting that he stuck to BOJ’s current stance.
OCBC currency strategist Christopher Wong said Ueda was likely to adopt a gradual and moderate approach as he monitors further data to get a better gauge of economic conditions in Japan.
“It is still early days to form an impression of his policy leaning at this point.”
In the latest Reuters poll, two-thirds of BOJ watchers expect the central bank to start unwinding its ultra-loose policy either in April or June. Still, a majority said Japan’s negative interest rate policy was likely to stay at least until the second half of 2024.
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Currency bid prices at 0510 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0601 $1.0594 +0.06 per cent -1.07 per cent +1.0615 +1.0593
Dollar/Yen 134.7050 134.4900 +0.13 per cent +2.62 per cent +134.8850 +134.1100
Euro/Yen 142.81 142.70 +0.08 per cent +1.79 per cent +142.9400 +142.1700
Dollar/Swiss 0.9339 0.9340 +0.01 per cent +1.02 per cent +0.9342 +0.9327
Sterling/Dollar 1.2022 1.2018 +0.07 per cent -0.56 per cent +1.2032 +1.2010
Dollar/Canadian 1.3541 1.3550 -0.07 per cent -0.06 per cent +1.3547 +1.3529
Aussie/Dollar 0.6814 0.6808 +0.08 per cent -0.04 per cent +0.6824 +0.6805
NZ 0.6238 0.6227 +0.20 per cent -1.73 per cent +0.6243 +0.6226
Dollar/Dollar
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
