The US dollar surged to a five-month high against major counterparts on Tuesday, buoyed by stronger-than-anticipated US retail sales figures, prompting concerns of potential intervention from Tokyo as the yen hovered near its lowest levels since 1990.
Meanwhile, the Chinese yuan experienced marginal declines despite robust GDP data for China’s first quarter, providing a lift to policymakers amidst lingering concerns over a prolonged property market crisis.
Retail sales data released on Monday revealed a 0.7% increase last month, surpassing economists’ expectations of a 0.3% rise. Additionally, February’s figures were revised upwards, indicating a 0.9% rebound – the largest gain in over a year, exceeding the previously reported 0.6%.
The latest data has sparked speculation about the timing of potential interest rate cuts by the Federal Reserve, following strong job gains in March and a pickup in consumer inflation.
Market sentiment now reflects a 41% probability of a rate cut by the Fed in July, down from approximately 50% prior to the data release, according to the CME FedWatch tool. The likelihood of the first cut occurring in September has also risen to nearly 46%.
Matt Simpson, Senior Market Analyst at City Index, expressed skepticism about a July rate cut, given the prevailing data consensus.
Amidst the dollar’s strength, the yen breached 154 per dollar, marking its weakest level in 34 years and triggering vigilance for potential yen-buying intervention from Japanese authorities.
In Tokyo, Finance Minister Shunichi Suzuki underscored close monitoring of currency movements and readiness to implement necessary measures.
The yen hovered around 154.26 per dollar, with market observers eyeing the 155 resistance level for potential insights into Japanese authorities’ intervention strategies.
The onshore yuan initially dipped to 7.2422 per dollar, before rebounding following China’s stronger-than-expected 5.3% year-on-year GDP growth in the first quarter. However, tepid retail sales figures signaled lingering concerns about consumer confidence and the economy’s uneven recovery.
The euro weakened to $1.060625, its lowest level since November 2, as market jitters persisted after the European Central Bank left the door open for a potential rate cut in June.
The Australian dollar and New Zealand dollar slid to five-month lows of $0.64085 and $0.58735, respectively.
Bitcoin experienced a modest decline of approximately 1%, reaching $62,550.00.