Greenback jumps; yen weakest since 1990 after strong US retail sales

THE greenback reached its highest since early November against a basket of currencies on Monday (Apr 15), and sent the yen to its lowest level since 1990, after US retail sales increased more than expected in March.

Retail sales rose 0.7 per cent last month, and data for February was revised higher to show sales rebounding 0.9 per cent instead 0.6 per cent as previously reported. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.3 per cent in March.

The US dollar gained as still-sticky inflation and still-strong growth led investors to push back expectations on when the Federal Reserve would likely begin cutting rates. The US central bank is expected to make fewer cuts than previously forecast.

“US data just keeps coming better and better than expected,” said Brad Bechtel, global head of FX at Jefferies in New York.

Traders are now pricing in fewer than two 25 basis points cuts by year-end, after previously expecting three.

New York Fed president John Williams said on Monday that the central bank’s policy was in a good place and remained restrictive, adding that his own view was that interest rate cuts would likely begin this year.

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The Japanese yen, in particular, has suffered from dollar strength and the large interest rate differential between the two countries.

Japanese monetary officials have ramped up warnings that they may intervene to shore up the currency. Finance Minister Shunichi Suzuki said on Monday he was watching currency moves closely, repeating that Tokyo is “fully prepared” to act.

Bechtel sees any potential intervention as more likely if the yen is underperforming, rather than during episodes of broad-based dollar strength.

“I think we still need a big day of yen really underperforming the market by 1 per cent or more,” he said, adding that Japanese officials might also step in at a key level, such as 155.

The dollar was last up 0.69 per cent against the Japanese currency at 154.32.

The dollar index reached 106.16, the highest since Nov 3, and was last up 0.07 per cent at 106.03.

Investors are also focused on escalating tensions in the Middle East which, if they worsen, are likely to benefit the safe-haven dollar and Swiss franc.

President Joe Biden warned Prime Minister Benjamin Netanyahu the US would not take part in a counteroffensive against Iran, an option Netanyahu’s war Cabinet favours after a mass drone and missile attack on Israeli territory, according to officials.

The euro was little changed against the dollar at US$1.0643.

It recorded its biggest weekly percentage drop since late September 2022 last week, as the European Central Bank left the door open to a rate cut in June.

The pound strengthened 0.22 per cent to US$1.248.

In cryptocurrencies, Bitcoin fell 1.64 per cent to US$66,035. It reached US$61,323 on Saturday, the lowest since Mar 20. REUTERS