The yen held constant near the psychologically significant level of 150 per dollar, while the dollar remained stable on Monday following data released last week that indicated U.S. inflation remained sticky and raised questions about when the Federal Reserve would begin its easing cycle.
In recent days, the yen has been trading close to 150, which has caused officials to discuss the currency movements and alerted markets to the possibility of Japanese government intervention.
The yen rose 0.20% to 149.94 per dollar in early trade on Monday, but it is still down 6% for the year. Against the euro, the yen was trading at three-month lows of 161.925.
Speaking against swift moves and threatening action even outside of its time zone, Ministry of Finance officials “took the first step onto the intervention escalation ladder,” according to Marc Chandler, chief market strategist at Bannockburn Global Forex.
Chandler stated that there doesn’t seem to be much in the charts to prevent a test of the 152 per dollar level from last year.
Due to the Presidents’ Day holiday, U.S. markets are closed on Monday. As a result, trading volumes are probably going to be low all day.
After recording five straight weeks of increases, the dollar index, which compares the value of the US dollar against six major rivals, began the week down 0.058% at 104.14. This year, the index is up 3%.
Data released last week revealed that both U.S. producer and consumer prices rose more than expected in January, elevating the potential of a delayed start to the Fed’s rate cuts.
Compared to March at the beginning of the year, traders are now predicting that June would mark the commencement of the easing cycle, according to the CME FedWatcg tool.
In addition, the markets have removed two quarter-point rate cuts for this year, implying less than 100 basis points of easing as opposed to the 150 basis points of reduction first anticipated.
Citi strategists said data released this week proved that an economic soft landing has not occurred and “makes us more convinced that one will not be.” According to their note, declining retail sales and the ongoing increase in unemployment claims are indicators of a weakening economy.
This week’s attention among investors will be on the Fed meeting minutes from last month, which are due out on Wednesday. This week, a number of Fed representatives are scheduled to speak, including Raphael Bostic and Christopher Waller.
The majority of the market’s hawkish adjustment may have already occurred, according to OCBC currency strategist Christopher Wong, who believes the dollar will stabilize in the absence of new catalysts.
