Chuck Mikolajczak
NEW YORK (Reuters) – The yen fell against the dollar on Tuesday, giving up some of its sharp gains in the previous session driven by suspected intervention by Japanese authorities, while a flurry of U.S. economic data largely supported the dollar.
The yen weakened 0.66% against the greenback to 157.35 per dollar, but was still short of its 34-year low of 160.245 hit on Monday when traders said Tokyo’s yen-buying intervention led to roughly for five yen.
The gain comes as economic data showed U.S. labor costs rose more than expected in the first quarter, supported by rising wages and benefits, confirming a surge in inflation earlier in the year that is likely to delay a long-awaited decline in interest rates. rates later this year.
“The trend is still higher for USD/JPY, we really need to see the policy divergence narrow a bit or the US bond market catches on to a more resilient supply that moves USDJPY further from the highs, perhaps creating a couple of weekly lower lows or some changes in the BOJ’s rhetoric, but I think it should be the latter,” said Eric Bregar, director of currency and precious metals risk management at Silver Gold Bull in Toronto.
Japanese officials may have spent about 5.5 trillion yen ($35.05 billion) supporting the currency on Monday, according to Bank of Japan data Tuesday.
The Bank of Japan (BOJ) on Tuesday left its monthly bond purchase plan unchanged for May. Japanese government bond (JGB) investors are looking for clues about the timing of a taper that would lead to higher and more attractive yields, supporting the yen.
remove advertising
.
It comes as the Fed begins its two-day monetary policy meeting on Tuesday, where it is expected to keep rates at 5.25%-5.5% while comments from Chairman Jerome Powell will be closely watched Watch for signs of the central bank’s future policy direction. latest data on inflation and labor market.
Markets continue to push back expectations for the timing of rate cuts this year, with the likelihood of a September rate cut at least 25 basis points (bps), just under 50%, according to CME (NASDAQ:)’s FedWatch Tool.
The dollar index rose 0.37% to 106.08, the euro fell 0.27% to $1.069. Sterling weakened 0.34% to $1.2518.
French and eurozone inflation data released on Tuesday raises confidence that the European Central Bank (ECB) will be able to start cutting interest rates in early June, ECB spokesman Francois Villeroy de Gallo said, while European Central Bank spokesman Pablo Hernandez de Cos said the ECB should start cutting interest rates in June if inflation continues its gradual decline as expected.
Eurozone inflation remained stable in April as expected, but a key indicator of underlying price pressures slowed.