Dollar Retreats on Profit-Taking, Yen Finds Support amid Intervention Threats

26 Mar 2024 , 10:02 AM

The dollar faced pressure on Tuesday, influenced by profit-taking and some support for the yen amidst ongoing efforts by Japanese officials to defend their currency.

In contrast, the New Zealand dollar bounced back from a four-month low to $0.5999, while sterling also strengthened to $1.2636, recovering from last week’s one-month low of $1.25755.

With limited economic data scheduled for the week, investors are eagerly awaiting the release of the Federal Reserve’s preferred inflation gauge on Friday. This data could offer insights into the future path of U.S. interest rates.

Expectations suggest that the U.S. core personal consumption expenditures (PCE) price index may increase by 0.3% in February, maintaining the annual rate at 2.8%.

Following last week’s central bank meetings, which indicated a global shift towards easing, the dollar had surged to a one-month high against major currencies. However, the Fed’s commitment to three rate cuts this year, alongside similar signals from other central banks, tempered the dollar’s gains.

Fed officials recently expressed heightened caution regarding the pace of inflation slowdown in the U.S., contributing to the dollar’s slight retreat. The dollar index edged 0.02% lower to 104.20, while the euro edged up 0.03% to $1.0840.

In Japan, the dollar dipped 0.04% against the yen to 151.37, facing resistance near the 152 level amid concerns of intervention by Japanese authorities. Finance Minister Shunichi Suzuki reiterated the readiness to take measures to address the yen’s weakness, echoing previous warnings.

Since the Bank of Japan’s rate hike last week, the yen has weakened over 1%, reflecting the significant interest rate differentials between Japan and other major economies, particularly the United States.

Meanwhile, the offshore yuan strengthened nearly 0.1% to 7.2487 per dollar, continuing its upward trend from the previous session. Suspected dollar selling by China’s state-owned banks and strong official guidance set by the central bank supported the currency in the onshore market.