On Thursday, as Federal Reserve Chair Jerome Powell allayed investors’ concerns about further aggressive monetary tightening, the dollar fell to a three-week low vs the yen.
After the Fed increased the benchmark rate by an anticipated 75 basis points to get it closer to neutral, the U.S. dollar fell as low as 135.105 yen, its lowest level since July 6. The Fed noted that while the labor market remains robust, other economic indicators have weakened. The dollar-yen is quite sensitive to changes in U.S. rates, which fell after Powell stated that he did not believe the economy was in a recession based on the strength of employment and that a recession was not necessary to cool the super-heated inflation.
What Is Happening in Monetary Markets?
According to Rodrigo Catril, a senior FX analyst at National Australia Bank, the dollar lost a little bit of altitude because I think the market was preparing for the likelihood of Fed chair Powell sounding a little bit more hawkish (OTC: NABZY).
The markets were somewhat drawn to his remarks about how near we are too neutral, Catril remarked. The market loves the possibility of slowing the rate of rising right now. The dollar was last trading at 135.525 yen, down 0.8 percent. The two-year Treasury yield, which is particularly vulnerable to changes in policy expectations, fell this week to almost its lowest point of 2.9979 percent. However, it continued to be roughly 20 basis points over the 10-year yield, which is often regarded as a harbinger of an impending slump. Later, Thursday, when the GDP statistics are released and will be the market’s next focus, it will be known whether the U.S. economy satisfies the criteria for a technical recession by recording two consecutive quarters of shrinkage.
Masafumi Yamamoto, the chief currency strategist at Mizuho Securities in Tokyo, stated that many are decreasing their long dollar holdings ahead of possibly unfavorable data out of the U.S. Yamamoto said those who had predicted quick increases in U.S. interest rates are presumably here taking profit regarding the yen.
