The U.S. dollar remained steady on Monday as traders awaited new data on U.S. inflation, which is expected to impact interest rate decisions. Meanwhile, comments from Japanese authorities failed to slow the yen's decline, which approached the key level of 160.
The yen weakened to 159.94 per dollar in early trading on Monday, marking its lowest level since April 29. On that date, the yen hit a 34-year low of 160.245, prompting Japanese authorities to intervene with a 9.8 trillion yen expenditure to support the currency.
As of the latest update, the yen was at 159.70 per dollar. Japan's top currency diplomat, Masato Kanda, stated on Monday that authorities would take appropriate action if there were excessive movements in the foreign exchange market. He also noted that Japan's inclusion on the U.S. Treasury's forex monitoring list would not hinder their ability to intervene.
The yen has faced renewed pressure following the Bank of Japan's (BOJ) decision earlier this month to maintain its bond-buying stimulus until at least the July meeting.
A summary of opinions from the BOJ's June policy meeting, released on Monday, indicated that some policymakers are advocating for timely interest rate increases due to the risk of inflation exceeding expectations.
"It's quite remarkable that despite expectations for further BOJ policy tightening, the dollar/yen pair continues to climb and is now approaching 160," said Carol Kong, currency strategist at Commonwealth Bank of Australia. "Unless the BOJ signals a very hawkish shift in policy, which seems unlikely, the dollar/yen pair is unlikely to reverse direction significantly."
The dollar index, which measures the U.S. currency against six major peers, was last recorded at 105.84, close to the nearly eight-week high of 105.91 reached last week.
This week's focus will be on the U.S. personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, due on Friday. Economists polled by Reuters anticipate that the annual growth in the index will slow to 2.6% in May. A lower-than-expected reading could strengthen the case for an interest rate cut as early as September, with futures currently indicating a 65% chance of this outcome.
Citi strategists noted accumulating evidence of a slowdown in the U.S. economy in a client note, suggesting that weaker demand could lead to a series of softer core inflation readings. "The combination of slowing economic activity, a loosening labor market, and lower inflation readings makes us increasingly confident that the Fed will start reducing policy rates in September," Citi said.
Geopolitical events will also be in focus this week, including the first U.S. presidential debate on Thursday and the initial round of voting in the French election over the weekend.
The euro, which has been under pressure since French President Emmanuel Macron called a snap election earlier this month, remained steady at $1.0693. The single currency has declined 1.4% this month. A poll published on Sunday showed France's far-right National Rally (RN) party and its allies leading the first round of the country's elections with 35.5% of the vote.
Christopher Wong, a currency strategist at OCBC, noted that the immediate impact on the euro could vary but is likely to be negative unless President Macron's coalition wins a larger share of the vote.
In other currencies, the British pound was flat at $1.2643, the Australian dollar was last at $0.6640, and the New Zealand dollar showed little change at $0.6113.
Paraphrasing text from "Reuters" all rights reserved by the original author.
