Dollar weaker due to renewed hopes for Fed rate cuts – Business & Finance

NEW YORK: The dollar index fell for a fourth straight session on Monday after a softer-than-expected US jobs report last week supported Fed Chairman Jerome Powell’s recent comments, but the dollar strengthened against the yen after the suspected interventions from last week.

The dollar index, which measures the greenback against a basket of major currencies, was on track for its longest streak of declines since early March. Friday’s U.S. payrolls report showed the smallest job growth since October, easing concerns that the Fed will have to keep interest rates high for longer.

The data confirmed Powell’s comments following Wednesday’s Fed policy statement that rate hikes remained unlikely.

The economic calendar is light this week, highlighted by the University of Michigan’s consumer confidence lecture on Friday, while a host of Fed officials will speak, including Richmond Fed President Thomas Barkin and New York President John on Monday Williams.

“It will (remain weaker) as long as the numbers remain conducive to that and as long as those Fed speakers don’t refute Jay Powell, but I have a feeling some of them will,” said Thierry Wizman, Global FX and Rates. strategist at Macquarie in New York.

“The labor market is clearly looser now than it was a year ago, but at the same time these more aggressive guys could easily put forward arguments to argue for a higher position for longer.” The dollar index fell 0.23% to 104.93, while the euro rose 0.23% to $1.0783.

The yen was weaker against the dollar after posting its strongest weekly gain since early December 2022 last week following two rounds of suspected Bank of Japan intervention to pull the currency away from a 34-year low of 160.245 per dollar. It rose 3.5% on the week.

On Monday, the yen weakened 0.44% against the dollar to 153.68 per dollar.

The Japanese and British markets were both closed for a public holiday on Monday, but as Japanese authorities chose last week’s quiet periods to intervene in the currency market, traders remained wary of the possibility of another.

Traders estimate that the Bank of Japan (BOJ) spent nearly $59 billion defending the currency last week, but likely only bought some time, analysts say, as the market still views the currency as a selling tool.

Still, “it’s quite treacherous to be long the dollar-yen right now,” Wizman said.

“It’s not because currency intervention is necessarily effective, it’s just that if the BoJ thinks US yields have peaked, and isn’t saying that it has, but if it thinks US yields have peaked achieved, they will be encouraged to try to intervene. again.” While Japan clearly has the capacity to intervene more, the broader macro environment remains quite negative for the yen, according to Goldman Sachs strategists, noting that the “success” of an intervention can only go so far .

Barclays analysts said the interventions “will do little more than slow the dollar’s eventual rise, rather than arrest it.

The yen is under pressure as US yields have risen while Japan’s have remained near zero, pushing cash out of the currency into higher-yielding assets.

The latest weekly report from US regulators shows that non-commercial traders, a category that also includes speculative trades and hedge funds, reduced their short positions in the yen to 168,388 futures contracts in the week ended April 30, still close to their largest bearish positions since 2007.

According to CME’s FedWatch Tool, markets are now pricing in nearly 50 basis points of Fed cuts this year, with a 66.6% chance of at least a 25 basis point rate cut in September.

Sterling strengthened 0.29% at $1.2581, ahead of a policy announcement from the Bank of England on Thursday, where interest rates are expected to be kept at 5.25%.