Dollar eases slightly as yen nears historic lows amid fears of intervention
Date
6/24/2024 8:46:01 AM
(MENAFN) On Monday, the dollar experienced a slight decline but remained close to its highest level in almost eight weeks. Meanwhile, the yen approached the 160 mark against the dollar, rekindling concerns about a potential new intervention to bolster the currency. Early trading saw the yen drop to 159.94 per dollar, marking its lowest point since April 29 when it plummeted to 160.245, the lowest in 34 years. This previous low had prompted Japanese authorities to intervene with an expenditure of nearly 9.8 trillion yen to support the currency. In later trading, the yen recovered slightly to 159.75 per dollar after Masato Kanda, Japan's chief currency policy official, assured that authorities would take appropriate measures against excessive foreign exchange movements. Kanda also noted that Japan's inclusion on the US Treasury Department’s monitoring list would not limit its actions.
The yen, highly sensitive to US Treasury bond yields, has depreciated more than 10 percent against the dollar since the start of the year. This decline is largely due to the significant interest rate differential between Japan and the United States. The high demand for interest rate differential trades, where investors borrow yen at low interest rates to buy higher-yielding currencies, has propelled the Australian and New Zealand dollars to their highest levels against the yen in 17 years.
This week, market participants are closely watching the upcoming release of the US Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, scheduled for Friday. Economists surveyed by Reuters anticipate the annual growth rate of the index to decelerate to 2.6 percent for May. According to the CME Fed Watch tool, if the index shows a weak growth rate, it is likely to strengthen expectations of a September interest rate cut, which markets currently estimate has a 70 percent probability.
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