Dollar Firms, Yen Weakens to Intervention-Wary Level of 150 per Dollar

Reuters

12:24 JST, October 26, 2023

SINGAPORE (Reuters) – The dollar was firm on Thursday, hovering near a one-week high as Treasury yields rose and investor appetite for riskier currencies dimmed, while the yen breached 150 per dollar to keep traders jittery about the prospect of intervention.

The Japanese yen touched a fresh one-year low of 150.32 per dollar overnight and was last at 150.26.

Japanese finance minister Shunichi Suzuki warned investors against selling the yen again on Thursday, saying authorities were closely watching moves. “I’m watching market moves with a sense of urgency, as before,” he told reporters at his ministry.

The closely watched 150 threshold is perceived by investors as a danger zone that may trigger intervention from Japanese authorities. Suzuki made no direct comment about the potential for intervention.

U.S. GDP data due later on Thursday is a key event risk for dollar/yen, according to Carol Kong, currency strategist at Commonwealth Bank of Australia, who said a strong report may pressure U.S yields higher and result in the yen testing fresh lows.

A recent surge in global interest rates is heightening pressure on the Bank of Japan to change its bond yield control next week. A hike to an existing yield cap set three months ago being discussed as a possibility, sources have told Reuters

The Australian dollar slid to an 11-month low of $0.6276 and was last down 0.35% at $0.6287. A surprisingly high reading for inflation on Wednesday stoked expectations of a further hike in interest rates.

The New Zealand dollar also touched an 11-month low of $0.5780 and was last down 0.22% at $0.5788.

Benchmark U.S. 10-year Treasury yields inched higher, resuming a move toward a 16-year peak of 5.0% briefly breached on Monday. The 10-year yield US10YT=RR was up 1 basis point at 4.964% in Asian hours on Thursday. US/

Mixed U.S. corporate earnings also weighed on risk sentiment.

Markets are showing renewed signs of uneasiness with US corporate earnings results an additional source of volatility, said Rodrigo Catril, senior FX strategist at National Australia Bank.

Meanwhile, the Canadian dollar fell 0.07% versus the U.S. dollar to 1.38 per dollar after the Bank of Canada held its key overnight rate at 5.0% as expected but left the door open to more rate hikes to tame inflation.

The euro was little changed at $1.0562 ahead of a policy decision from the European Central Bank later in the day.

The ECB is expected to keep interest rates unchanged at a record high, snapping a 15-month streak of hikes. It may discuss a quicker reduction of its oversized portfolio of government debt as it battles excessive inflation.

With the European economy soft and inflation easing, we expect attention will soon turn to the likely timing of rate cuts, said CBA’s Kong.

At this stage we have the first cut penciled in for June 2024. Soft European economic data and negative interest rate differentials between Europe and the US will likely keep a lid on euro/dollar.

Sterling was last at $1.2097, down 0.09% on the day and is on course for a weekly decline of 0.5%.

Against a basket of currencies, the dollar was at 106.58, just shy of the one-week high of 106.61 it touched on Wednesday.

In cryptocurrencies, bitcoin BTC= last fell 0.04% to $34,665.00. The world’s largest cryptocurrency has surged 15% this week on the back of speculation that an exchange-traded bitcoin fund is imminent.