(MENAFN) During early trading on Monday, the dollar surged above 160 yen for the first time since 1990, driven by a higher-than-expected inflation reading in the United States. This unexpected uptick in inflation dampened speculation of a potential cut in US interest rates for the year, prompting a rally in the dollar's value against the Japanese currency. The dollar reached a notable high of 160.17 yen in morning trading, triggering speculation of possible intervention by Japanese authorities to bolster the yen's position.
The depreciation of the Japanese currency mirrored the continued strength of the dollar, fueled by diminishing expectations of a rate cut from the Federal Reserve. The surge in the dollar's value followed Friday's release of the Personal Consumption Expenditures (PCE) index, the Fed's preferred gauge of inflation, which surpassed expectations. This development occurred in the context of the Bank of Japan's decision to maintain its current monetary policy stance at its recent meeting, refraining from further tightening and slightly revising inflation expectations for fiscal year 2024.
Furthermore, statements from Federal Reserve policymakers cautioning against imminent interest rate cuts have contributed to a reevaluation of market expectations regarding the frequency of rate adjustments for the year. Initially, investors anticipated up to six rate cuts in 2024; however, recent developments have led to a revision of expectations, with investors now anticipating just one rate cut.
Japanese officials have reiterated their readiness to intervene in the foreign exchange market in response to volatile movements in the exchange rate, citing speculators as a significant concern. The surge in the dollar's value against the yen underscores the shifting dynamics in currency markets, driven by economic data releases and central bank policy decisions.
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