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HomeLatestDollar Steady Amid Renewed Rate Cut Speculation; Yen Retreats

Dollar Steady Amid Renewed Rate Cut Speculation; Yen Retreats

The dollar maintained stability on Monday as speculation regarding potential rate cuts by the Federal Reserve resurfaced following a softer-than-expected U.S. jobs report. Meanwhile, the yen, which experienced significant volatility last week, started the week on a downward trajectory.


Last week, the yen recorded its most substantial weekly gain since December 2022, prompted by suspected interventions by Tokyo authorities to prevent the currency from further decline. However, on Monday, the yen declined broadly against major currencies, with notable decreases against the U.S. dollar, British pound, and euro.


Despite the substantial intervention efforts by the Bank of Japan (BoJ) last week, analysts suggest that the market sentiment towards the yen remains bearish. The BoJ’s interventions may have temporarily stabilized the yen, but the underlying macroeconomic factors continue to weigh on the currency.


The divergence in interest rates between the United States and Japan has been a significant driver of yen weakness, as investors seek higher yields elsewhere. Speculative trades and hedge funds have reduced their yen short positions but remain bearish on the currency.

Looking ahead, the Fed’s rhetoric following the release of the jobs report will likely influence the direction of the dollar-yen exchange rate. Traders will closely monitor speeches by Fed officials for further insights into the central bank’s policy stance.

In Mainland China, markets reopened after a three-day closure, during which the offshore yuan strengthened against the dollar. However, the yuan retreated slightly on Monday, influenced by broader market dynamics.

The U.S. jobs report, which showed slower job growth and subdued wage increases, has increased speculation about potential Fed rate cuts. Markets are pricing in the possibility of rate cuts later this year, with November fully priced in.

The softer data is viewed positively by the Fed, as it could help alleviate inflationary pressures. Despite holding interest rates steady at its recent meeting, the Fed signaled its inclination towards eventual rate cuts, albeit possibly later than initially anticipated.

In currency markets, the dollar index, which measures the dollar against six major currencies, recovered from a recent low but remains up for the year. The euro and sterling were relatively stable, while the Australian dollar awaited the Reserve Bank of Australia’s policy decision.

Overall, market sentiment continues to be influenced by evolving economic data and central bank policies, particularly regarding interest rate trajectories.