Yen nears 145; dollar steady after CPI data supports Fed pause predictions

11 Aug 2023 , 09:52 AM

After statistics revealed that U.S. consumer prices climbed moderately in July, traders bet that the Federal Reserve is done raising interest rates, keeping the dollar stable on Friday. In contrast, the yen was edging closer to the psychologically significant 145 level.

Early Asian trading saw the Japanese yen weaken 0.10% to 144.89 per dollar, its lowest level since June 30. At that time, it also briefly crossed the 145 per dollar threshold, fuelling investor concerns about further intervention from the Japanese government.

When the dollar surpassed 145 yen in September of last year, Japan interfered, pushing the pair to about 140 yen as the Ministry of Finance bought the yen to weaken the currency.

The yen fell against the euro as well, falling to 159.135 from Thursday’s 15-year high of 159.19.

Liquidity is anticipated to be low on Friday because Japan will be on vacation.

Data released overnight revealed that the U.S. consumer price index up 0.2% in July, mirroring the increase in June. From January through July of last year, the CPI increased 3.2%.

According to Reuters’ poll of economists, the CPI was expected to increase 0.2% last month and by 3.3% annually.

The probability that the Federal Reserve would raise its benchmark overnight interest rate from its current 5.25%–5.50% range during a policy meeting on September 19–20 is less than 10%, according to traders of futures linked to the Fed’s policy rate. By March 2024, the Fed’s first rate drop is anticipated in the futures contracts.

The kiwi fell 0.03% to $0.602, while the euro rose 0.08% to $1.0988.

To $0.6534, the Australian dollar increased by 0.20%. Earlier, the governor of Australia’s central bank hinted that additional tightening would be necessary but seemed to imply that the rate increases made so far might be sufficient to control inflation.

Former Reserve Bank of Australia Governor Philip Lowe testified before MPs and stated the most recent data are consistent with the economy continuing to follow the ‘narrow path’ to a soft landing.

Ahead of GDP results, the pound was last trading at $1.2684, up 0.07% on the day. Sterling was attempting to end a three-day losing trend.

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