China in Focus as Dollar Holds Steady, Yen Prepares for Potential Rate Move

5 Mar 2024 , 10:25 AM

Tuesday saw the dollar remain stable vs the yuan as investors processed the deluge of policy announcements from China. Meanwhile, a pickup in Tokyo inflation appeared to move Japan one step closer to eliminating negative interest rates.

Bitcoin saw increased trading, rising 1.2% to $68,341 following a more than 7% increase on Monday. Investments into cryptocurrency exchange-traded funds, particularly in the US, have helped the blockchain asset.

Few people were startled by the National People’s Congress (NPC) of China’s early news, as Beijing continued to aim for a 3% budget deficit and 5% economic growth.

According to analysts, reaching the goal will be difficult because of the long-lasting real estate crisis, poor consumption, sluggish global development, and geopolitical tensions that are impeding progress.

At 7.1987, the yuan saw minimal movement as investors anticipated the release of more specific stimulus plans.

Following statistics showing Tokyo core inflation accelerated to 2.5% in February from 1.8% in January, the Japanese yen remained stable. Though it slowed to 3.1%, the measure that did not include food and energy remained higher than the Bank of Japan’s 2% target.

After avoiding the resistance level of 150.85 yen, which has been capping the currency for almost three months, the dollar was slightly weaker at 150.44 yen.

A move higher would allow for a retest of November’s peak at 151.92, but it would also increase the possibility of Japanese intervention to purchase yen.

The Federal Reserve is expected by markets to begin reducing U.S. rates in June and to do so by around 75 basis points this year, with a 64% probability.

When Fed Chair Jerome Powell testifies before Congress on Wednesday and Thursday, he will have an opportunity to provide investors with an update on his own perspective.

The euro tested resistance at $1.0866 before idling at $1.0853. The dollar index, which compares the value of the currency to six important rivals, remained steady at 103.840.

Markets anticipate that the European Central Bank (ECB), which meets on Thursday, will maintain interest rates at 4.0%. Futures have priced in 89 basis points of easing for 2024 and suggest an 88% chance that reduction will begin in June.

The pound held steady at $1.2692 on Wednesday, ahead of the British budget. Jeremy Hunt, the finance minister, has been attempting to quell rumours of significant tax cuts ahead of the election.

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