Ahead of US inflation data, the dollar finds support in early trade

12 Sep 2023 , 10:31 AM

On Tuesday, the yen held steady near a one-week high as market reverberations from Japan’s top central banker about a potential end to its negative interest rate policy helped the dollar reclaim some lost territory.

In a newspaper interview over the weekend, Bank of Japan (BOJ) Governor Kazuo Ueda stated that the bank could have enough information by year’s end to decide whether it can eliminate negative rates. As a result of his comments, the yen saw its biggest day rise versus the dollar in two months on Monday.

The Japanese yen yesterday traded slightly lower against the dollar at 146.61 after reaching a one-week high of 145.91 the previous session.

Since the Federal Reserve started its aggressive rate-hike cycle last year while the BOJ remains a dovish outlier, the yen has come under intense pressure against the dollar as a result of widening interest rate differentials with the US.

In other news, the U.S. dollar mostly recovered from its Monday loss of over 0.5% versus a basket of currencies.

The Australian dollar recently traded 0.12% down at $0.6423, while the New Zealand dollar dropped 0.14% to $0.5911. Both currencies were among those which benefited the most from a weaker dollar on Monday, rising 0.8% and 0.6%, respectively.

But the euro reached $1.0771, a one-week high.

On Wednesday, the U.S. government will release its August inflation figures, which will help traders determine if the world’s largest economy is actually on track for a ‘soft landing’ and how far the Federal Reserve can raise interest rates.

The U.S. dollar index, which had an eight-week winning streak at the conclusion of last week, increased 0.03% to 104.60 after declining 0.46% the day before. The pound stayed steady at $1.2508.

Near Monday’s one-week high, the offshore yuan found some support and last traded at 7.3020 per dollar.

It increased by more than 0.8% the previous session, marking its biggest daily rise in about six months. This increase was aided by statistics showing that new bank lending in China exceeded forecasts in August by nearly doubling from July’s figure.

For feedback and suggestions, write to us at [e-mail]