Dollar increases on economic concerns in early trade

6 Sep 2023 , 09:33 AM

On Wednesday, risk sentiment was dampened by worries about China and the world economy. The yen was close to a 10-month low, prompting the strongest warning from Japan’s top currency ambassador since mid-August.

The yen’s overnight low since November 4 was 147.66 per dollar in the early Asian hours, slightly below 147.8 per dollar. Since the Asian currency has been circling the crucial 145-to-dollar level for some weeks, traders are keeping a close look out for any indications of an intervention.

Masato Kanda, Japan’s senior currency ambassador, told reporters on Wednesday, ‘We won’t rule out any actions if speculative moves persist.

The attempts of Japan to stop the rapid depreciation of the yen since last year have been spearheaded by Kanda, the country’s vice-minister of finance for foreign relations.

When the dollar climbed beyond 145 yen in September of last year, Japan interfered in the currency markets by purchasing the yen, which caused the pair to fall back to about 140 yen.

The dollar increased by 0.067% to 104.80 against a basket of currencies, which is not far from the six-month high of 104.90 it reached overnight. On Tuesday, economic data from China and Europe stoked some concerns about slowing global growth and caused investors to rush for the dollar.

While business activity in the euro zone and Britain declined last month, a private sector poll revealed that services activity in China grew at the weakest rate in eight months in August.

In Asian trading, the euro was flat at $1.0721 after overnight trading saw it cross a three-month low of $1.0705. Sterling recently traded at $1.2559, down 0.03% on the day. A three-month low of $1.25285 was also reached.

Governor of the Federal Reserve Christopher Waller stated on Tuesday that the most recent economic data allows the U.S. central bank room to determine whether it has to raise interest rates once more and that he saw nothing that would compel such a move.

According to the CME FedWatch tool, markets are pricing in a 93% chance of the Fed keeping interest rates unchanged later this month and a 55% chance of no further raises this year.

After falling 1.3% on Tuesday as a result of the Reserve Bank of Australia’s policy decision to maintain rates at current levels, the Australian dollar dropped 0.17% to $0.637.

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