Written by Tom Westbrook
SINGAPORE (Reuters) – The dollar steadied on Wednesday and the yen fell to levels it hit last year after strong U.S. data boosted yields and bets on Federal Reserve rate cuts.
The yen touched 158.42 overnight, its weakest against the dollar in nearly six months, and last settled at 158.19.
Japan’s Finance Minister Katsunobu Kato had warned against speculative selling of the yen the previous day as the exchange rate neared the 160 level that dragged the dollar down for half of last year.
“Even chart intelligence is a significant level of resistance,” said Bart Wakabayashi, manager of the Tokyo branch State Street (NYSE:).
“We’re getting strong numbers from the US … with rates rising,” he said, pushing back expectations of a Fed rate cut to the north of summer or beyond.
“Is there even a conversation about whether they’re going to cut or go? The narrative has changed dramatically, leading to what should be more dollar strength.”
The euro fell about 0.5% overnight and traded around $1.0351 on the Asian day. Sterling also dipped and bought $1.2478. it hit a six-month low of 7.3319 to the dollar.
Traders were surprised ahead of Friday’s US labor data and Jan.’s inauguration. 20, when Donald Trump is expected to begin his second term as US president with a number of policy announcements and executive orders.
Data on Tuesday showed US job openings rose unexpectedly in November, layoffs were flat, while service sector activity accelerated in December and the average price paid for inputs rose to a two-year high – a possible warning of inflation.
Bond markets responded by sending the 10-year yield up more than eight basis points to hit an eight-month high of 4.699%, while the 30-year yield rose 7.4 bps and is down nine bps from breaking 5%. [US/]
Traders are only calling for 37 bps of ease this year, according to LSEG data obtained from futures estimates.
The dollar followed suit and the contrast between a strong US economy and weak data in Australia and New Zealand has the Antipodean currencies trailing for years.
New Zealand is in full recession mode and, having lost more than 11% in the greenback over the past year, it piled up at $0.5634 on Wednesday, not far from the two-year low of $0.5588 reached in late December.
The Australian dollar has sunk 9.2% against the dollar through 2024 and, at $0.6228, is not far from breaking the 2022 low of $0.6170. Australia’s monthly inflation data showed headline CPI rose from a three-year low in November, although core inflation strengthened the case for a rate cut.
