Yen finds little solace as dollar retreats in early trade

5 Oct 2023 , 10:07 AM

The dollar and U.S. Treasury yields both stabilized slightly lower on Thursday, providing the yen with some much-needed comfort after mixed U.S. economic data overnight had investors downgrading the likelihood that the Federal Reserve will raise interest rates again this year.

The dollar index, which compares the value of the dollar to those of six other currencies, maintained steady at 106.78.

The dollar lost some of its recent gains as U.S. private payroll growth in September was much slower than anticipated, according to the ADP National Employment Report released on Wednesday. However, this likely exaggerates the pace of the labour market’s slowdown.

After the data, longer-dated U.S. Treasury rates declined from 16-year highs and held below recent highs throughout the Asian morning.

The non-manufacturing purchasing managers’ index (PMI) from the Institute for Supply Management (ISM) decreased 0.9 points to 53.6 but stayed above the 50-point threshold that separates monthly expansion from contraction.

The ISM Services PMI at least offers one data point to imply that economic activity isn’t picking up again.

The yen, which is frequently affected by U.S. yields, was last trading at about 148.85 yen, down nearly 0.2% from late U.S. levels and off of Tuesday’s low of 150.165.

The 150-line break caused the yen to gain by 2%, raising concerns about a potential Japanese intervention. However, the Bank of Japan’s money market statistics revealed on Wednesday that Japan most likely did not intervene in the currency market the day before.

The euro was fairly unchanged in other markets, maintaining its position above this week’s new low of $1.0448 at $1.0512.

A Reuters poll of 20 analysts found that $1.04 was the median prediction for how low the euro will fall this month, with only one respondent predicting that the currency will reach parity. In any of the forecasters’ point projections, there was not a single parity call.

After hitting a new low on Wednesday of $1.20385 per dollar, sterling traded at $1.2139.

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