Dollar weakens slightly after March personal consumption expenditure inflation data

29 Apr 2024 , 07:51 AM

US dollar weakened slightly after March’s personal consumption expenditure inflation data came on Friday. US personal consumption expenditure inflation in March stood at 2.8% on y-o-y basis. On month-on-month basis, it stood at 0.8%. This was marginally above expectations of 2.7%. The slower GDP growth in March along with this data has increased the probability of interest rate cut by US Federal Reserve. Dollar Index (DXY) came down to 105.99 level.

The Japanese yen was up 0.2% against the dollar at 158.05.

The value of the yen fluctuated by over 3.5 yen on Friday as traders expressed their dissatisfaction over the Bank of Japan’s decision to maintain policy settings and provide no indications about cutting back on its purchases of Japanese government bonds (JGBs), which might have placed a floor beneath the yen.

The main focus of the markets this week is the Federal Reserve’s May 1 policy review. Investors are already bracing for a delay in rate decreases following a wave of persistent U.S. inflation, and officials, such as Chair Jerome Powell, have emphasized that even these plans depend on data.

At its meeting on April 30-May 1, the Fed is expected to maintain its benchmark interest rate at 5.25% to 5.5 percent. Based on the CME’s FedWatch tool, investors are presently expecting maybe just one cut this year, which is expected by November.

Additionally, markets are alert for any action taken by Japanese authorities to stem the yen’s nearly 11% decline this year.

The yen had its largest decline in six months on Friday, but it also momentarily spiked to 154.97 to the dollar, sparking rumours that Japanese authorities may have looked up exchange rates before making a move. It wasn’t immediately apparent why the move was made.

With a 0.15% gain, sterling stood at $1.2509, but a ways down from its highs of $1.2541 on Friday.

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