The dollar maintained its stability on Monday following the release of U.S. inflation data indicating a potential rate cut by the Federal Reserve in June, while the yen hovered near 152 per dollar, keeping traders wary of potential intervention.
According to the Commerce Department’s Bureau of Economic Analysis, the personal consumption expenditures (PCE) price index rose 0.3% in February, slightly below economists’ forecasts of a 0.4% increase. Additionally, the report revealed a notable rise in consumer spending last month, highlighting the resilience of the economy. Most global markets were closed on Friday, with European markets also shut on Monday.
Federal Reserve Chair Jerome Powell expressed satisfaction with the latest U.S. inflation figures, aligning with his previous statements following the Fed’s policy meeting last month.
Mansoor Mohi-uddin, chief economist at the Bank of Singapore, noted, “The Fed’s willingness to tolerate inflation well above 2% while still considering rate cuts is supporting risk assets.”
Market expectations now suggest a 68.5% likelihood of a Fed rate cut in June, up from 57% at the end of the previous week, according to the CME FedWatch tool. Traders are pricing in 75 basis points of cuts for this year.
Citi strategists anticipate the Fed to initiate rate cuts in June, with the possibility of three or even five rate cuts this year depending on economic activity and labor market conditions.
Investor focus will turn to March’s employment data, with weak job figures potentially increasing the likelihood of the Fed implementing rate cuts from June onwards.
In the currency market, the euro edged 0.03% lower to $1.0787, near its one-month low of $1.0769 from last week. Sterling was up 0.12% at $1.2637.
The dollar index, measuring the greenback against six other major currencies, was 0.057% higher at 104.54, near its six-week peak of 104.73 reached last week.
Attention remains on the yen as it hovers near levels not seen since 1990, prompting concerns of intervention by Japanese authorities. The yen touched a 34-year low against the dollar last week and was last at 151.395 per dollar on Monday.
Finance Minister Shunichi Suzuki reiterated his stance against excessive currency movements, suggesting potential action to address rapid yen fluctuations.
Speculators maintain a net short yen position worth $10.64 billion, according to the latest weekly data from the U.S. markets regulator, reflecting heightened bearish sentiment toward the yen.
Meanwhile, China’s yuan weakened against the dollar despite signs of economic recovery and efforts by the central bank to stabilize the currency.
In other currencies, the Australian dollar rose by 0.08% to $0.6521, while the New Zealand dollar remained relatively unchanged at $0.59805.
In the cryptocurrency market, bitcoin increased by 1% to $70,425.88, while ether rose by 3% to $3,600.