Yen Stumbles Against Dollar as U.S. Economic Data Supports Greenback
Yen Weakens Against Dollar Amid Suspected Intervention
The yen stumbled against the dollar on Tuesday, giving up some of its strong gains from the previous day, which were sparked by suspected intervention by Japanese authorities. The yen weakened by 0.66% against the greenback to 157.35 per dollar, although it was still below its 34-year low of 160.245 reached on Monday due to yen-buying intervention by Tokyo driving a strengthening of about five yen.
U.S. Economic Data Bolsters Dollar
The dollar gained ground following U.S. economic data showing that labor costs had increased more than expected in the first quarter due to a rise in wages and benefits. This confirmed the surge in inflation early in the year, which is likely to postpone a much-awaited interest rate cut later in the year.
Market Analysis and Insights
Analysts suggest that the trend is still upward for dollar/yen, with potential factors such as policy divergence, sustainable bond market bids, and changes in BOJ rhetoric influencing the currency pair. Japanese officials may have spent approximately 5.5 trillion yen ($35.05 billion) to support the currency on Monday.
Fed Meeting and Market Expectations
The Fed started its two-day monetary policy meeting on Tuesday, expected to maintain rates at current levels. Market expectations for a rate cut later in the year have decreased, with the dollar index rising by 0.37% to 106.08. The euro and sterling also saw declines against the dollar.
European Central Bank and Inflation Data
Inflation data from France and the Eurozone indicate that the ECB may start lowering interest rates in June. Eurozone inflation remained steady in April, with some indicators showing a decrease in underlying price pressures.
