2024-03-26 19:16:23
The dollar rose on Tuesday as traders waited for a new catalyst to provide guidance on Federal Reserve policy, while the yen fell after Japan’s finance minister said he was not ruling out any measures to cope with the weakening of the currency.
Investors are wondering whether the U.S. central bank will cut interest rates three times this year, as is currently planned, if inflation remains high and economic growth strong.
The dollar index rebounded slightly after orders for long-lived U.S. manufactured goods rose more than expected in February, while business equipment spending showed tentative signs of recovery, the growth outlook for the economy in the first quarter remains optimistic.
The market is intensely looking for signs of cracks in the U.S. economy and they are hard to find, and durable goods illustrate that again today, said Adam Button, chief currency analyst at ForexLive in Toronto. It’s really a wait-and-see market.
Personal consumption expenditures (PCE) due Friday are the main economic catalyst this week. The core U.S. PCE price index is expected to rise 0.3% in February, keeping the annual pace at 2.8%.
Trading volumes could be low on Friday as US stock and Treasury markets are closed for Good Friday.
The dollar index gained 0.06% to 104.28, while the euro fell 0.05% to $1.0831.
The greenback could come under some pressure this week due to portfolio rebalancing at the end of the month and quarter.
The yen fell 0.09% to 151.52, reversing earlier gains, as verbal interventions from Japanese authorities continued. It has weakened over the past week, despite the end of eight years of negative interest rates from the Bank of Japan (BOJ).
Traders continue to focus on the still wide interest rate differentials between Japan and the rest of the world, particularly the United States. If the Japanese currency crosses the $151.94 mark, reached in October 2022, it will reach its lowest level since 1990.
In 2022, Japanese authorities intervened in the foreign exchange market to support the yen.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that rapid currency movements were undesirable, after Masato Kanda, Japan’s top currency diplomat, warned on Monday against speculators trying to sell the yen.
“The dollar/yen is stuck around the 151.50 level. People want to go long the yen because of carry yields, but if the level hits 152 or 153, they could be punished by the monetary authorities and so they don’t want to try,” said Yusuke Miyairi, currency strategist at Nomura.
The carry trade involves investors borrowing from low-yielding currencies to invest in higher-yielding currencies.
The Chinese yuan has also been in the crosshairs of operators since its brutal fall on Friday. It rose slightly in the offshore market to 7.248 per dollar after a firmer-than-expected fix from the People’s Bank of China.
In cryptocurrencies, bitcoin fell 1.28% to $70,078.01. It remains below the record of $73,803.25 reached on March 14.
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