The yen fell against the dollar on Monday in calmer currency market trading after volatile moves last week, while investors weighed the odds of a deep Fed interest rate cut next month ahead of a slew of U.S. economic data.
The respite follows a tumultuous week that began with a massive sell-off across currencies and stock markets, driven by worries over the U.S. economy and the Bank of Japan’s hawkishness.
Last week ended calmer, with Thursday’s stronger-than-expected U.S. jobs data leading markets to pare bets for Federal Reserve rate cuts this year.
“The U.S. equities have recovered rather nicely from their big profit sell-off, and that’s probably giving the dollar a little bit of boost because equities are doing better, and the economy is not so bad,” said Joseph Trevisani, senior analyst at FXStreet.com in New York. “We are back to a sensible view of the economy.”
Still, investors are pricing 100 basis points of Fed cuts by year-end, according to the CME Group’s FedWatch tool, and U.S. producer and consumer prices numbers due on Tuesday and Wednesday could shift market perceptions.
“There’s a lot of data coming out around the world that is going to have some bearing on monetary policy decisions,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
“I think in the context of calmer equity markets, we’ve seen a bit of repricing of Fed rate cut expectations, which is helping to stabilize the dollar to some extent.”
Reuters
