Dollar Slips, Yen Gains Again—Markets Await US Data and China's Maneuvers
The US dollar fell sharply on Tuesday, just as markets were preparing for a series of important economic data that could determine the future direction of interest rates. At the same time, the Japanese yen remained strong following Prime Minister Sanae Takaichi's landslide victory, which had triggered volatility in the currency market.
The pound sterling tended to stabilize early in the Asian session after its volatile swings the previous day. Investors were still weighing the political pressure looming over British Prime Minister Keir Starmer, as well as speculation that interest rate cuts in the UK could continue. Sterling was last trading around $1.3682, having risen 0.6% in the previous session.
The yen was trading around 155.85 per dollar, maintaining its gains after a 0.8% overnight rise. Support for the yen also came from "verbal warnings" from Japanese officials signaling they were continuing to monitor the market, especially after the yen weakened briefly following Takaichi's victory.
However, some analysts believe the yen's strength could be temporary. Market focus will soon turn to the Takaichi administration's fiscal policy—if government spending becomes more aggressive, the yen risks coming under renewed pressure. There are even projections that USD/JPY could reach 164 by the end of the year. Some observers also believe that for the USD/JPY decline to be more "sustainable," the market needs a less lax fiscal signal and a firmer (more hawkish) stance from the Bank of Japan.
Meanwhile, the euro weakened slightly to around $1.19 after a sharp surge on Monday, while the dollar index slumped to near a one-week low. Pressure on the dollar is said to have been fueled by media reports that China is encouraging domestic banks to diversify their holdings away from US government bonds, which has made market participants more cautious about dollar-based assets. (az)
Source: Newsmaker.id
