Yen resumes gradual fall against dollar amid uncertainty over US interest rates

8/12/2024 7:26:53 AM

(MENAFN) The yen experienced a gradual decline against the dollar on Monday, with trading volumes remaining thin due to a holiday in Japan. This movement comes as market participants grapple with divergent expectations regarding the U.S. interest rate outlook for the coming month. The previous week had been marked by a significant sell-off across currencies and stock markets, driven by concerns about a potential U.S. recession and the bank of Japan's tightening monetary policy. However, the end of the week saw a more muted atmosphere, as stronger-than-expected U.S. jobs data on Thursday led markets to reassess their bets on Federal Reserve interest rate cuts for the remainder of the year.

Despite this, there remains skepticism among investors about the Federal Reserve's capacity to reduce rates significantly. The CME Group’s FedWatch service indicates that expectations for a 100 basis point cut by year-end, typically associated with a recession scenario, have diminished. Consequently, markets are closely monitoring upcoming economic data and events, including the U.S. producer and consumer price indices due on Tuesday and Wednesday, the central bankers' symposium in Jackson Hole next week, and Nvidia's earnings report later in the month. As of the latest data, the dollar was trading at 147.15 yen, up 0.4 percent, while the euro stood at USD1.0920, with its index holding steady at 103.18. Despite hitting its highest level since January 2 at 141.675 yen per dollar on Monday, the yen remains down 4 percent against the dollar year-to-date.

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