Forex: Yen gives back some gains, dollar rebounds before inflation
12/09/2023 12:21
By Samuel Indyk and Rae Wee
LONDON, Sept 12 (Reuters) - The yen slipped on Tuesday
after its biggest daily rise since mid-July the day before after
comments from Japan's top central banker on a possible end to
its negative interest rate policy reverberated throughout
markets.
The dollar, meanwhile, regained lost ground after clocking
its biggest daily fall since July 13 on Monday, while the pound
slipped after mixed UK labour market data.
Bank of Japan (BOJ) Governor Kazuo Ueda told a newspaper
interview over the weekend the bank could get enough data by
year-end to determine whether it can end negative rates, remarks
that on Monday saw the yen clock its largest daily gain against
the dollar since July 12.
The Japanese currency JPY=EBS was last 0.2% lower at
146.915 per dollar, after scaling a one-week top of 145.91 in
the previous session.
"Ueda's comments were a little more balanced than you would
have thought from the market reaction," said Adam Cole, chief
currency strategist at RBC Capital Markets.
"Japan is still a long way from meeting the criterion of
sustainable 2% inflation and the comments don't really on Monday
change much for me," Cole added.
The yen has come under immense pressure against the dollar
as a result of growing interest rate differentials with the
United States, since the Federal Reserve began its aggressive
rate-hike cycle last year while the BOJ remains a dovish
outlier.
Taking a different view, however, Japan's senior ruling
party official Hiroshige Seko said on Tuesday he took Ueda's
remarks as meaning that the central bank will continue with
monetary easing.
Elsewhere, the U.S. dollar reversed some of its losses from
the previous session, with the euro EUR=EBS falling 0.3% to
$1.0716 after touching a one-week high of $1.0771 ahead of
Thursday's European Central Bank policy announcement.
The pound fell after a mixed UK labour market report that
showed more signs of cooling in the three months to July, but
wage growth continued to rise quickly, and above the rate of
inflation.
"Drill down and if you strip out the public sector, private
sector pay barely increased in level terms between June and
July," said ING UK economist James Smith.
"With unemployment notching higher, the labour market data
doesn't scream a need to keep hiking rates much further."
Sterling GBP=D3 was last down 0.3% against the dollar at
$1.2471 and little changed against the euro.
U.S. INFLATION DATA IN FOCUS
Attention was now turning to U.S. inflation data for the
month of August due on Wednesday, with traders on the lookout
for whether the Federal Reserve has further to go in raising
rates.
The U.S. dollar index =USD , which ended last week with an
eight-week winning streak, rose 0.2% to 104.80, after falling
0.5% in the previous session, its biggest one-day drop since
July 13.
"The U.S. data is the main event of the week because the Fed
is so sensitive to incoming inflation data," RBC's Cole said,
noting that the bigger risk for the dollar is to the downside,
given a larger number of forecasts for core inflation are above
consensus.
"An in-line number would be disappointing for the dollar and
therefore we're negative on the release itself," Cole added.
The Aussie AUD=D3 was last 0.2% lower at $0.6419 while the
New Zealand dollar NZD=D3 fell 0.4% to $0.5899.
The onshore CNY=CFXS and offshore yuan CNH=D3 both found
support near their one-week highs and last bought 7.2925 per
dollar and 7.3109 per dollar, respectively.
The two had clocked their largest daily gains against the
dollar in about six months on Monday.
Reuters reported that China's central bank was tightening
its scrutiny of bulk dollar purchases by domestic firms, at a
time when the yuan faces mounting depreciation pressure.
In cryptocurrencies, bitcoin BTC=BTSP rose almost 4% to
$26,141, after falling below $25,000 for the first time in three
months on Monday.
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(Reporting by Samuel Indyk and Rae Wee; Editing by Sam Holmes,
Ed Osmond and Susan Fenton)
((Samuel.Indyk@thomsonreuters.com))