Yen strengthens: The yen saw gains against the dollar on Monday, fueled by indications that the Bank of Japan is set to exit negative interest rates during its upcoming policy meeting next week. This contrasts with market expectations for the Federal Reserve to reduce rates in June.
The dollar index, which gauges the dollar against the yen and five other major currencies, remained near a nearly two-month low recorded on Friday.
This followed the release of monthly payrolls data suggesting a slowdown in the US labour market, thus reinforcing anticipation of a policy easing by the Fed.
Sterling saw a notable retreat from its multi-month high after enjoying its most robust performance since November 2022 last week.
The decline comes amid speculations that the Bank of England may take a more gradual approach in cutting rates compared to the Fed or the European Central Bank.
The dollar softened by 0.17 per cent to 146.82 yen, nearing the five-week low of 146.48 from Friday.
The dollar index held steady at 102.68, remaining close to Friday’s low of 102.33, a level not seen since January 15.
Westpac strategists suggested that the dollar-yen pair may remain under pressure throughout the week, with potential sales expected around the 148 mark, as anticipation grows regarding the BOJ’s policy adjustments on March 18-19.
Reports indicate a growing inclination among BOJ policymakers to terminate negative rates during their upcoming gathering, spurred by expectations of substantial pay increases from Japan’s major firms following the annual “shunto” wage negotiations.
In contrast, market sentiments point to a 73 per cent likelihood of the Fed cutting rates by the conclusion of its June 11-12 meeting, as reflected by the CME Group’s FedWatch Tool. This sentiment solidified after the softness observed in Friday’s jobs data, aligning with Fed Chair Jerome Powell’s recent remarks regarding the potential for rate cuts.
Sterling depreciated by 0.7 per cent to $1.2859 after closing Friday with a surge to $1.2950, a level not seen since late July.
The euro remained relatively stable at $1.0944, having peaked at $1.0980 on Friday for the first time since January 12, following the ECB’s decision to maintain record-high rates while hinting at potential future cuts.
In the cryptocurrency realm, bitcoin saw a slight decline of 0.17 per cent to $68,301, lingering below the record peak of $70,175 achieved on Friday.
(With Reuters Inputs)
