On Friday, the U.S. dollar remained stable, heading for its fifth consecutive weekly gain, as investors assessed economic data and solid expectations of a Federal Reserve rate cut in June. The yen traded around the crucial 150 per dollar level.
The dollar index, measuring the U.S. currency against six major peers, showed a 0.09% increase at 104.35 on Friday, slightly recovering from a 0.4% dip on Thursday. It is set to secure a 0.2% gain for the week, marking its fifth consecutive weekly increase.
Thursday witnessed a slip in the dollar following a mixed set of U.S. economic data, particularly with retail sales falling more than anticipated in January due to declines in auto dealerships and gasoline service stations.
A separate report indicated a decrease of 8,000 in initial claims for state unemployment benefits to 212,000 for the week ending Feb. 10, suggesting the U.S. labor market remains tight.
Christopher Wong, a currency strategist at OCBC in Singapore, noted the softening of U.S. activity and a pause in USD momentum, expecting a lower USD following a softer PPI reading. However, overall market expectations regarding the timing and extent of the first Fed cut will continue to influence FX market volatility.
Despite strong economic data dispelling early and significant rate cut expectations from the Fed, traders now project an 80% likelihood of a rate cut in June, as per the CME FedWatch tool.
Federal Reserve Bank of Atlanta President Raphael Bostic commented on Thursday about the progress in lowering inflation pressures but refrained from calling for interest rate cuts, emphasizing the chance to make policy decisions without urgency due to a robust labor market.
Investor attention is on comments from policymakers, especially with Federal Reserve Chair Jerome Powell scheduled to give the Senate banking committee a biannual monetary policy update on March 7.
The Japanese yen slightly weakened to 150.08 per dollar, hovering near the 150 mark, prompting market vigilance for potential intervention by Japan or statements from officials to weaken the currency.
The yen, sensitive to U.S. rates, faces continuous pressure as expectations regarding the Federal Reserve’s easing cycle are revised downward. The currency has depreciated by 6% this year.
Kieran Williams, head of Asia FX at InTouch Capital Markets, noted the potential need for concrete actions by Japanese officials to curb JPY depreciation if U.S. Treasury yields rise further, considering the diminishing effectiveness of verbal interventions.
Unexpectedly entering a recession at the end of last year, Japan lost its status as the world’s third-largest economy to Germany, casting doubt on the central bank's timeline for exiting its prolonged ultra-loose monetary policy.
In the currency markets, the euro showed a 0.07% decrease to $1.0763, while sterling was at $1.2582, down 0.14% for the day. The Australian dollar eased 0.20% to $0.651, and the New Zealand dollar declined 0.21% to $0.609.
Paraphrasing text from "CNBC" all rights reserved by the original author.
