Strong Dollar Surpasses 161 Yen, Poised for Quarterly Gains

28 Jun 2024 , 09:17 AM

The dollar was on track for a second straight quarterly gain and soared to a near four-decade high against the battered yen in Asian trade on Friday, ahead of a critical US inflation report.

Neither an overnight dip in US yields nor statistics showing healthy consumer price growth in Tokyo could stop the downward slide in Japan’s currency, which fell to its lowest level since 1986 at 161.155 per dollar.

For the quarter, it is down 6% against the dollar, and for the year, it has lost 12%, the most of any G10 currency. It traded at 172.37 per euro, a lifetime low on the shared currency, as yen bears tested the authorities’ commitment.

Low Japanese interest rates have encouraged the “carry trade” of selling yen for higher-yielding currencies, even as Japanese yields have begun to increase and Japanese officials have warned of another round of currency intervention.

Core inflation in Japan’s capital rose in June, according to statistics released on Friday, raising expectations of a few tiny interest rate hikes in the second half of 2024.

In other news, the dollar was solid in Asia this morning as the first presidential debate between Republican nominee Donald Trump and Democratic President Joe Biden began in Atlanta.

The euro fell 0.1% to $1.0691, while pound slipped marginally to $1.2626. The Australian dollar fell 0.4% to $0.6623, but is expected to gain approximately 1.6% for the quarter, as stubborn inflation has crushed hopes for Aussie rate cuts anytime soon.

The New Zealand dollar fell 0.3% to $0.6065 on Friday, but was still up 1.5% for the quarter. The US dollar index was 0.2% higher at 106.07 on Friday, marking a 1.5% quarterly increase.

The dollar’s strength and the US balance sheet were potential subjects for Biden and Trump’s debate, but NAB’s Attrill said many market participants would be waiting to see if Biden was quick on his feet and up to the task.

Later in the day, traders will be looking for the U.S. personal consumption expenditures price index, the Federal Reserve’s preferred inflation indicator, which is expected to fall to 2.6% in May, the slowest pace in more than three years.

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