Dollar strength pushes yen towards 160

26 Jun 2024 , 09:43 AM

The dollar was solid on Wednesday, trading near the 160 yen mark as investors became cautious and counted down to the release of US pricing data at the end of the week.

The euro fell little overnight and held stable at $1.0708 in Asia trade. The yen’s position of 159.71 per dollar has markets on edge, since it is just a whisker away from where Japanese authorities are expected to intervene to buy yen in April.

A surprise increase in Canadian inflation, shown in data released on Tuesday, injected some nervousness into otherwise calm foreign exchange markets, propelling the Canadian dollar temporarily to a three-week peak.

Markets are counting on Friday’s U.S. data, which show annual growth in the Federal Reserve’s preferred core personal consumption expenditure index dropped to 2.6% in May, the slowest in more than three years, paving the way for rate reduction.

Policymakers, on the other hand, continue to signal that they are not in a rush, with Fed Governors Lisa Cook and Michelle Bowman emphasising that choices will be based on data.

“Inflation in the U.S. remains elevated, and I still see a number of upside inflation risks that affect my outlook,” Bowman said.

The Australian dollar fell 0.1% to $0.6640, while the New Zealand dollar fell to $0.6115, with tiny movements reflecting weak trading.

Sterling remained stable at $1.268, while bitcoin rebounded somewhat after a drop below $60,000 this week to trade at $61,668.

Along with the yen, China’s yuan is under pressure from the dollar’s relentless strength. China appears to be signalling a willingness to accept a weaker currency by steadily decreasing the midpoint of the yuan’s daily trading range against the dollar.

For months, the yuan has remained close to the bottom of its band, last trading at 7.2884 per dollar in offshore trade.

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