Yen Gains in Early Trade

25 Jul 2024 , 09:16 AM

The yen received support on Thursday from unwinding carry trades ahead of next week’s Bank of Japan (BOJ) policy meeting, as well as a rotation out of megacap growth companies, which lowered risk appetite and provided some safe haven demand.

The Australian and New Zealand dollars continued to struggle due to low commodity prices, the euro fell following a disappointing purchasing managers’ index (PMI) reading, and the dollar held steady ahead of U.S. GDP data later in the day.

The yen climbed more than 0.5% to an intraday high of 152.835 per dollar, its best in 2-1/2 months, as traders abandoned short yen bets ahead of the BOJ’s July meeting, where a rate hike remains on the cards.

According to Reuters, the central bank will debate whether to hike interest rates next week and announce a plan to cut bond purchases in half over the following few years, showing its determination to gradually unwind its huge monetary stimulus.

The Japanese yen hovered near its highest level in two and a half months against the euro, while sterling remained near a one-month low, last buying 198.41 yen.

Japanese Finance Minister Shunichi Suzuki and top currency diplomat Masato Kanda both declined to comment on the yen’s recent steep increase.

In the broader market, the dollar was on the offensive, benefiting from a bout of risk aversion following Wall Street’s steep drop amid a continued rotation out of technology sectors.

The euro fell 0.02% to $1.0837, weighed down by Wednesday’s PMI survey, which indicated that growth in eurozone economic activity slowed this month, pointing to a bleak prognosis for the region.

Sterling dipped 0.09% to $1.2895, while the dollar index remained relatively unchanged at 104.37.

Traders are watching second-quarter U.S. GDP numbers later on Thursday, but the outcome is unlikely to change predictions on Federal Reserve rate cuts this year, with a September move already fully priced in.

The Australian dollar fell to $0.65575, its lowest level since early May, as sliding commodity prices continued to drive it down.

The New Zealand dollar decreased by 0.24% to $0.5915.

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