Dollar Climbs to New 1-Year High Against Weakened Yen

Japanese Yen and U.S. dollar banknotes are illustrated in March 10, 2023 REUTERS/Dado Ruvic/Illustration/File Photo/File Photo LONDON – On Monday, the dollar reached its highest point in more than a year against the Japanese yen, benefiting from the reduced expectations of U.S. Federal Reserve interest rate cuts for the next year. Despite the yen weakening by almost 14% this year, Japanese officials have been notably silent, leaving markets on edge for the possibility of intervention to boost the Japanese currency. Additionally, Moody’s downgrade of the U.S. credit rating outlook to “negative” has been taken into account, with attention now focusing on the U.S. consumer price index due on Tuesday. Following remarks from Fed policymakers, led by Chair Jerome Powell, that indicated inflation concerns persist, the market has lowered its bets on rate cuts, resulting in an increase in short-dated Treasury yields and support for the dollar. The dollar climbed to 151.85 yen on Monday, its highest level in over a year, and recorded a 0.2% increase, building on last week’s 1.4% rally against the yen, the largest in three months. The dollar index, which measures the dollar against other major currencies, hovered around 105.80 and maintained its grip on most of the gains from the previous week. The coming week includes additional Fed speakers likely to reaffirm Powell’s stance, according to Matt Simpson, a senior market analyst at City Index. Simpson emphasized the likelihood of the Fed holding off on rate cuts despite any softer CPI print, with inflation remaining above target. In Japan, Monday’s data indicated that wholesale inflation has slowed to less than 1% for the first time in over two and a half years, indicating that cost pressures that had driven up prices were beginning to dissipate and offering little support for the yen. The euro remained stable around $1.0693 against the dollar, and the sterling also held firm, standing at $1.2231 ahead of the UK’s upcoming economic data. Reporting by Dhara Ranasinghe; Additional reporting by Brigid Riley in TOKYO; Edited by Emelia Sithole-Matarise; Our Standards: The Thomson Reuters Trust Principles. Acquire Licensing Rights, opens new tab.

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