Dollar Advances, Yen Overtakes Peers on Hawkish BOJ
The dollar headed for a second day of gains after Federal Reserve officials had signaled caution on further interest-rate cuts while hawkish comments from the Bank of Japan supported the yen, making it the best performer in the Group of 10 against the greenback Wednesday.
The Bloomberg Dollar Spot Index rose 0.2%
“Investors and traders are also looking for details on any more tariffs to come in April that could widen the trade war,” strategists at Monex wrote. “In the absence of major data points this week, headlines have been dictating the mood across markets”
President Donald Trump said he would likely impose tariffs on automobile, semiconductor and pharmaceutical imports of around 25%, with an announcement coming as soon as April 2, a move that would dramatically widen the president’s trade war
Fed officials in January expressed their readiness to hold interest rates steady amid stubborn inflation and economic policy uncertainty, minutes from the Federal Open Market Committee’s Jan. 28-29 meeting showed
USD/JPY dropped 0.4% to 151.50; Bank of Japan Board Member Hajime Takata said it’s important for authorities to continue considering gradual interest hikes to contain upside risks to inflation
NZD/USD rallies as much as 0.5% to 0.5732; it traded weaker earlier after the RBNZ cut rates by 50 basis points for the third straight meeting
Kiwi flipped to gains after Reserve Bank Governor Adrian Orr had said further interest-rate cuts would be in increments of 25bps
The New Zealand dollar exchange rate is broadly at a fair value, Orr told a parliamentary committee later
RBNZ has been one of the most aggressive rate cutters, needs to be cautious given domestic inflation, he said
“The New Zealand story merits close attention where a ‘jumbo’ rate cut leads to a strong NZD,” wrote Bob Savage, head of markets strategy and insights at BNY in New York. “The reasoning being that the RBNZ is closer to ending easing now than most of the rest of the G-10”
“Put that against the GBP where higher CPI and less rate cuts didn’t help the currency,” he said. “Markets are watching inflation and growth still as guideposts to the rest of the world value”
GBP/USD erased gains after touching a fresh two-month high and was trading 0.2% lower at 1.2584
Cable met only brief support after data showed UK inflation climbed to the highest level in 10 months in January
Traders trimmed bets on further UK interest-rate cuts from the Bank of England this year in the wake of a surprise jump in UK inflation, and now see fewer than two more reductions through December
EUR/USD fell for a third day, it dropped 0.2% to 1.0423
Pair rebounds from day low after ECB’s Schnabel said officials are getting closer to the point where they pause or halt interest rate cuts
“Rising goods inflation could be a big problem that central banks can only ignore for so long,” said Jordan Rochester, the head of FICC strategy at Mizuho. “The ECB’s hawkish Schnabel just now could be a warning sign of awkward conversations to come”.
Source : Bloomberg
