Greenback Maintains Strength as Global Uncertainty Lingers

3 Apr 2024 , 10:37 AM

The yen was almost at its lowest point in decades on Wednesday as the dollar gained ground, but further losses in the Japanese currency were restrained by Tokyo’s increased threat of intervening in the market.

The world’s second-largest economy, China’s services activity growth quickened in March, according to a private-sector poll, suggesting a moderate revival in morale. This news kept the yuan stable.

As of right now, the yen is trading at 151.585 per dollar, close to the 34-year lows it reached at 151.975 last month following the Bank of Japan’s historic policy change.

The BOJ increased rates for the first time in 17 years, but the yen was severely hurt by policymakers’ decision to hold off on additional hikes, particularly in light of the persistently large yield difference between Japan and the US.

For several days now, Japanese policymakers have been applying pressure to maintain the value of the yen. The looming possibility of an intervention acts as strong resistance for the dollar at the 152 yen mark, which some market players view as a line in the sand.

Other than that, the euro increased by 0.02% to $1.0772, moving away from a low reached more than a month ago during the previous session when the US dollar experienced some profit-taking late into the night.

Sterling fell to $1.25675, down 0.08%.

The dollar was last stable at 104.76 against a basket of currencies, having achieved a nearly five-month high of 105.10 on Tuesday.

This week’s increase in the value of the dollar has been supported by yet another round of strong U.S. economic data, which included manufacturing expanding in March for the first time in one and a half years, a stronger-than-anticipated increase in new orders for goods made in the country, and a resilient labor market.

Moreover, Fed representatives have indicated that they are not in a haste to lower rates.

A rising dollar has caused the Chinese yuan to weaken; it was last trading at 7.2341 to the US dollar on the onshore market, close to a 4-1/2-month low that was reached on Tuesday.

The offshore equivalent of it decreased by 0.03% to $7.2572 per dollar.

Despite some better domestic manufacturing data, such as Wednesday’s service sector announcement, the yuan has continued to decline. China’s industrial activity grew at the quickest rate in 13 months in March, according to a private poll conducted by Reuters earlier this week. These findings were consistent with the positive government numbers that were made public over the weekend.

Analysts generally agree that the world’s second-largest economy and investor confidence are still being severely hampered by the ongoing property sector crisis, and that it is still too soon to celebrate encouraging data findings.

A stronger dollar and a weaker yuan have also put pressure on the Australian and New Zealand dollars, which are frequently considered as liquid stand-ins for the yuan.

The Kiwi fell 0.18% to $0.5959 and the Aussie fell 0.12% to $0.65095.

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