Dollar Surges to 4th Weekly Gain as Yen Tumbles on Revised Rate Expectations

9 Feb 2024 , 09:29 AM

On Friday, the dollar continued its upward trajectory as traders reduced their bets on the timing of the Federal Reserve’s rate drop and the Bank of Japan’s rate hike. Meanwhile, the yen plummeted close to a 10-week low.

The yen saw minimal movement in early Asian trade at 149.315 per dollar, following its first decline since November 27 when it fell to 149.48 late in the previous session.

Shinichi Uchida, the deputy governor of the Bank of Japan, stated on Thursday that ‘it’s hard to imagine’ the central bank will continue hiking rates ‘rapidly’ even after terminating its negative interest rate policy, which the market believes might occur as soon as next month.

Japanese Finance Minister Shunichi Suzuki stated on Friday morning in Tokyo that he was ‘watching FX moves carefully’ and reiterated that the central bank makes the choices about monetary policy. The warning had little effect on the yen.

The dollar index, which compares the value of the dollar to six important rival currencies, was stable at 104.15 on Thursday after rising 0.1% in response to new data that supported the strength of the US labour market and further dented expectations of an early rate drop by the Federal Reserve.

The dollar index has increased by 0.18% so far this week, building on its strong start from last Friday’s explosive monthly payroll statistics and Fed Chair Jerome Powell’s hawkish remarks in an interview that aired on ’60 Minutes’ on Sunday.

Tuesday’s Consumer Price Index (CPI) inflation report for January is the next significant planned data release from the United States.

According to CME Group’s FedWatch Tool, traders now placed just 16.5% odds for a rate drop at the Fed’s upcoming policy meeting in March, down from 65.9% odds one month ago.

Sterling remained steady at $1.2619 as the euro barely moved, trading at $1.0774. The European Central Bank and Bank of England policymakers have been resisting market bets for early rate reductions, and as a result, both currencies have shown some degree of resilience.

Bets for a delayed start to Reserve Bank rate cuts, or possibly the possibility of additional hikes, helped New Zealand’s currency rise 0.34% to $0.6117 this week as statistics this week revealed a stronger-than-expected labour market.

At $0.6491, the Australian dollar was stable.

The price of the most popular cryptocurrency, bitcoin, was barely moving at $45,300.

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