Yen gives back some gains, US dollar rebounds before inflation data
THE yen slipped on Tuesday (Sep 12) after its biggest daily rise since mid-July the day before.
That rise came after comments from Japan’s top central banker on a possible end to its negative interest rate policy reverberated throughout markets.
The US dollar, meanwhile, regained lost ground after clocking its biggest daily fall since Jul 13 on Monday, while the pound slipped after mixed UK labour market data.
Bank of Japan (BOJ) governor Kazuo Ueda told a newspaper interview over the weekend the bank could get enough data by year-end to determine whether it can end negative rates, remarks that on Monday saw the yen clock its largest daily gain against the US dollar since Jul 12.
The Japanese currency was last 0.2 per cent lower at 146.915 per US dollar, after scaling a one-week top of 145.91 in the previous session.
“Ueda’s comments were a little more balanced than you would have thought from the market reaction,” said Adam Cole, chief currency strategist at RBC Capital Markets.
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“Japan is still a long way from meeting the criterion of sustainable 2 per cent inflation and the comments don’t really on Monday change much for me,” Cole added.
The yen has come under immense pressure against the US dollar as a result of growing interest rate differentials with the US, since the Federal Reserve began its aggressive rate-hike cycle last year while the BOJ remains a dovish outlier.
Taking a different view, however, Japan’s senior ruling party official Hiroshige Seko said on Tuesday he took Ueda’s remarks as meaning that the central bank will continue with monetary easing.
Elsewhere, the US dollar reversed some of its losses from the previous session, with the euro falling 0.3 per cent to US$1.0716 after touching a one-week high of US$1.0771 ahead of Thursday’s European Central Bank policy announcement.
The pound fell after a mixed UK labour market report that showed more signs of cooling in the three months to July, but wage growth continued to rise quickly, and above the rate of inflation.
“Drill down and if you strip out the public sector, private sector pay barely increased in level terms between June and July,” said ING UK economist James Smith.
“With unemployment notching higher, the labour market data doesn’t scream a need to keep hiking rates much further.”
Sterling was last down 0.3 per cent against the US dollar at US$1.2471 and little changed against the euro.
Attention was now turning to US inflation data for the month of August due on Wednesday, with traders on the lookout for whether the Federal Reserve has further to go in raising rates.
The US dollar index, which ended last week with an eight-week winning streak, rose 0.2 per cent to 104.80, after falling 0.5 per cent in the previous session, its biggest one-day drop since Jul 13.
“The US data is the main event of the week because the Fed is so sensitive to incoming inflation data,” RBC’s Cole said, noting that the bigger risk for the US dollar is to the downside, given a larger number of forecasts for core inflation are above consensus.
“An in-line number would be disappointing for the US dollar and therefore we’re negative on the release itself,” Cole added.
The Aussie was last 0.2 per cent lower at US$0.6419 while the New Zealand dollar fell 0.4 per cent to US$0.5899.
The onshore and offshore yuan both found support near their one-week highs and last bought 7.2925 per US dollar and 7.3109 per US dollar, respectively.
The two had clocked their largest daily gains against the US dollar in about six months on Monday.
Reuters reported that China’s central bank was tightening its scrutiny of bulk US dollar purchases by domestic firms, at a time when the yuan faces mounting depreciation pressure.
In cryptocurrencies, bitcoin rose almost 4 per cent to US$26,141, after falling below US$25,000 for the first time in three months on Monday. REUTERS
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