Yen under pressure; dollar weakening as markets prepare for data festival

29 Aug 2023 , 10:04 AM

In anticipation of a flood of economic data this week, traders were cautious with their dollar wagers on Tuesday, as the yen battled close to levels that prompted intervention last year.

After falling 0.2% on Monday, the dollar index, which compares the value of the dollar to six significant rival currencies, slid 0.077% to 103.85. The index increased by 2% this month as strong economic data strengthened predictions that interest rates may rise further.

That opinion gained further traction after Fed Chairman Jerome Powell said on Friday that additional rate rises could be necessary to lower the inflation that is still too high, but he pledged to proceed cautiously at subsequent meetings.

This week, the focus will be on a number of economic indicators, including payrolls and personal consumption spending, since the U.S. central bank has noted that the interest rate path will be significantly contingent on data.

The July job vacancies data will be presented first later in the day. According to economists surveyed by Reuters, job opportunities will total 9.465 million, a little decrease from June.

According to the CME FedWatch tool, markets are pricing in a 78% chance of the Fed keeping interest rates unchanged next month, while the odds of a raise in November are now 62%, up from 42% last week.

While the yen flounders close to a nine-month low against the dollar, traders everywhere are keeping a close eye out for any indications of a potential intervention from Japanese authorities.

In Asian trading hours, the yen edged up 0.12% to 146.36 per dollar but clung to 146.75, its lowest level since November 9.

Last September, when the dollar surpassed 145 yen, Japan intervened in the currency markets by purchasing the yen, which caused the pair to drop to about 140 yen. The yen has lost 11% of its value against the dollar this year.

In advance of this week’s euro zone inflation statistics, the euro was up 0.11% at $1.0829. The euro has increased for two days in a row, moving away from the two-month low it reached last week.

Sterling last traded at $1.2616, up 0.10% on the day and off recent two-month lows.

While the New Zealand dollar declined 0.02% to $0.591, the Australian dollar increased 0.03% to $0.643.

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