📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Yen hits 4-week low, dollar up ahead of key inflation data

Published 05/28/2024, 10:14 PM
Updated 05/29/2024, 03:50 PM
© Reuters. FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
EUR/USD
-
GBP/USD
-
USD/JPY
-
DXY
-

By Hannah Lang

NEW YORK (Reuters) -The dollar rose on Wednesday, boosted by higher U.S. bond yields ahead of key inflation data later in the week, and strengthened against the Japanese yen.

The dollar reached as high as 157.715 yen on Wednesday, edging closer to levels that led to bouts of likely intervention from Tokyo at the end of April and early May.

It was last at 157.665 yen, up 0.3% on the day.

"I think it's just going to continue to be a grind higher for dollar/yen, all across yen pairs as well," said Brad Bechtel, global head of FX at Jefferies. "It's basically tiptoeing its way back towards that 160 level."

Slightly softer U.S. consumer price inflation data this month weakened the dollar across the board. Since then, U.S. Treasury yields have resumed their climb, with the benchmark 10-year yield at its highest in almost four weeks at 4.57%.

The main drivers were Tuesday's lackluster auction of two- and five-year notes that raised doubts about demand and data showing U.S. consumer confidence unexpectedly improved in May.

The U.S. dollar index was last up 0.43% at 105.11. The U.S. core personal consumption expenditures (PCE) price index report - the Federal Reserve's preferred measure of inflation - will be released on Friday. Expectations are for it to hold steady on a monthly basis.

Apart from the Japanese yen, most foreign currencies have rallied against the U.S. dollar since mid-April, said Marc Chandler, chief market strategist at Bannockburn Global Forex. "I'm thinking that that move is over and we should look for a dollar rebound."

The Aussie dollar was down 0.47% at $0.6618, even after Australian consumer price inflation unexpectedly rose to a five-month high in April, adding to risks that the next move in local interest rates might be up. [AUD/]

Also in the mix for the yen was the carry trade, which involves borrowing in a low-yielding currency to invest in higher yielders.

"The yen remains under considerable downward pressure with carry appetite elevated due to low FX volatility," Derek Halpenny, head of research global markets EMEA at MUFG, said in a note, citing elevated levels in euro/yen and sterling/yen.

The euro dropped to a near two-year low on the pound of 84.84 pence, driven by strong German regional inflation data.

It recovered after nationwide German data showed inflation rose slightly more than expected to 2.8% in May, though that is unlikely to change expectations for a European Central Bank rate cut next month.

© Reuters. FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

The common currency was last down 0.49% at $1.0804.

The pound weakened to $1.2702 a day after hitting a two-month high.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.