1/1
Swipe or click to see more
REUTERS/DADO RUVIC/ILLUSTRATION/FILE PHOTO
This image shows yen and dollar banknotes in March 2023. The dollar fell today after data showed consumer prices fell unexpectedly in June, while a sharp rise in the Japanese yen sparked speculation about possible intervention in the currency.
The dollar fell today after data showed consumer prices fell unexpectedly in June, while a sharp rise in the Japanese yen sparked speculation about possible intervention in the currency.
The yen rose more than 2% at one point after falling to a 38-year low against the greenback last week.
Local Japanese television station Asahi, citing government sources, said officials had intervened.
Domestic news service Jiji quoted senior foreign exchange diplomat Masato Kanda as saying he could not comment on whether or not there had been an intervention, but the yen’s recent movements were “not in line with fundamentals.”
Whether an intervention took place will only become clear when the Japanese Ministry of Finance publishes its updated figures on the interventions at the end of the month.
Analysts pointed out that the move was likely caused by widespread repositioning following this morning’s weaker US consumer price index (CPI). A September rate cut by the US Federal Reserve is now seen as a certainty, which will reduce the attractiveness of long-term dollar/yen trades.
Positioning in long dollar/yen trades and momentum indicators was also tight ahead of the data release, as many traders were unlucky.
“I think it was just the reaction to the weak US CPI and the pressure on the long USD positioning. The USD weakened across the board but even more so against the JPY because of the positioning,” said Athanasios Vamvakidis, global head of G10 FX strategy at Bank of America Global Research in London.
Buying dollars and selling yen is very popular due to the large interest rate difference between the two countries.
“A lot of this can be attributed to some unwinding as people got into this carry trade,” said Michael Boutros, senior technical strategist at FOREX.com in New York.
The dollar index was last down 0.49 percent at 104.45 and had previously reached its lowest level since June 7 at 104.07.
Against the yen, the dollar lost 1.81 percent to settle at 158.75, after hitting its lowest level since June 17 at 157.4. This morning, the rate was as high as 161.76.
Boutros noted that the dollar has reached an important area of technical support against the yen and needs to stay above it to maintain the dollar’s uptrend that has been ongoing since December.
Today’s consumer price data comes after Fed Chairman Jerome Powell said this week he could not yet assume that inflation would fall to 2% in a sustainable manner, although he had “some confidence in that.”
The unexpectedly high inflation in the first quarter raised fears that the price decline could last longer than previously expected.
There were also fears that after the improvement in the second half of last year, it might be more difficult to reduce inflation further compared to 2023.
“The question was whether we could keep up or beat it to maintain the disinflation trend from last year,” said Steve Englander, head of global G10 foreign exchange research and North American macro strategy at Standard Chartered Bank’s New York office. But “this was a pretty significant” improvement.
The euro rose 0.34 percent to $1.0867, reaching $1.090, its highest level since June 7.
The pound hit a near one-year high after comments from Bank of England policymakers and better-than-forecast GDP data prompted traders to scale back bets on an August interest rate cut in the UK.
BoE chief economist Huw Pill said on Wednesday that price pressures were continuing and today’s data showed that British economic output rose 0.4 percent in May, above expectations.
The pound last rose 0.51% to $1.2911, reaching $1.2947, its highest level since July 27, 2023.
Among cryptocurrencies, Bitcoin rose 0.72% to $57,821.
