PCE Data Softens Dollar, Rate Cut Bets Lift Yen

1 Apr 2024 , 10:17 AM

The yen hovered around 152 per dollar on Monday, putting traders on edge about the possibility of intervention, while the dollar remained largely stable as data indicating declining U.S. prices supported speculation that the Federal Reserve could lower interest rates in June.

The Bureau of Economic Analysis of the Commerce Department said on Friday that the personal consumption expenditures (PCE) price index increased by 0.3% in February, as opposed to the 0.4% increase that Reuters’s poll of experts had predicted.

The study also highlighted the resiliency of the economy by showing that last month, consumer expenditure increased for the first time in just over a year. On Friday, most markets were closed worldwide.

Chair of the Federal Reserve Jerome Powell said on Friday that the most recent U.S. inflation data was “along the lines of what we would like to see,” echoing his comments from the Fed’s policy meeting last month.

According to the CME FedWatch tool, markets are now pricing in a 68.5% chance of the Fed lowering rates in June, up from a 57% chance at the end of last week. This year, traders are also factoring in 75 basis points of reduction.

At $1.07945, the euro was up 0.06%, still close to the more than one-month low of $1.0769 reached last week. At $1.2637, sterling was up 0.12% for the day.

The dollar index, which compares the value of the US dollar to six competitors, decreased by 0.038% to 104.42 but held near to its six-week high of 104.73 reached last week.

The yen has been the focus of attention in the currency market as its rise towards levels last observed in 1990 has renewed the possibility of Japanese government intervention.

The yen last traded at a slightly firmer rate of 151.315 per dollar on Monday, having hit a 34-year low of 151.975 versus the dollar on Wednesday.

Japan made two currency market interventions in 2022 when the yen was falling towards a 32-year low of 152 to the dollar: one in September and another in October.

Predicting Japan’s future ambitions for the yen is still challenging. Since its fiscal year is over, the Bank of Japan doesn’t have to be concerned about the unexpected movement of the yen having an effect on balance sheets.

However, the yen has recovered from 34-year lows thanks to reports of last week’s emergency meeting of the three monetary authorities, the Ministry of Finance (MOF), Bank of Japan, and Financial Services Agency, as well as officials’ scolding.

Reiterating his caution on swift yen fluctuations, Finance Minister Shunichi Suzuki stated on Monday that he would not rule out remedies against excessive currency movement and would respond properly.

The Australian dollar increased by 0.21% to $0.654 in other currencies, while the New Zealand dollar increased by 0.20% to $0.599.

Bitcoin recently increased in value by 1.83% to $70,927.00. At $3,619.20, ether last saw a rise of 3.46%.

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