Written by Tom Westbrook
SINGAPORE (Reuters) – The dollar firmed on Wednesday on stronger U.S. economic data, pushing the Japanese yen closer to a test of levels that will trigger official market intervention in 2022.
The yen was trading at 151.52 yen to the dollar in early Asian time, just below the 151.94 yen level at which the Japanese authorities decided to intervene to buy the yen in October 2022.
The yen was the worst performing of the major currencies in the quarter ending later this week, falling more than 7% against the dollar even after Japan exited negative interest rates last week.
Officials have warned almost daily against speculative moves, and Finance Minister Shunichi Suzuki has said Japan will not rule out any measures if it deems the yen is depreciating too quickly, sending markets tumbling to the dollar. = I'm nervous about trying 152 yen.
“(The Bank of Japan's) interest rate hike was seen as no big deal, but it ended eight years of negative interest rates, unorthodox policies and forward guidance,” said Bob Savage, head of market strategy at BNY Mellon. ” he said.
“The risk of the Bank of Japan becoming hawkish and the yen concentration between the Bank of Japan and the Ministry of Finance remains,'' he said.
Bank of Japan board member Naoki Tamura will give a speech and press conference at Wednesday's Asia session.
China has solidified its onshore pegs to counter market selling pressure that sent the yuan plummeting to a four-month low on Friday. The dollar was stable at $7.25 in offshore trading on Tuesday.
Australian data released this morning showed inflation remained at a two-year low of 3.4% in February, reinforcing market expectations that interest rates will be lower next time. The Australian dollar fell 0.1% to $0.6525.
It decreased by 4.3% in the same quarter. Other Asian markets were muted in the morning as markets awaited the release of US core inflation data on Friday.
Overnight data showed that U.S. durable goods orders in February exceeded expectations. Consumer confidence data was subpar, only partially offsetting January's steep decline, but gave the dollar a slight boost.
The euro was at $1.0829, roughly in the middle of the range it has maintained over the past year, and fell 1.9% in a quarter when expectations for a U.S. interest rate cut subsided.
The Swiss franc, still reeling from last week's surprise interest rate cut in Switzerland, fell about 0.5% against the dollar overnight to a four-month low of 0.9042 francs.
It fell about 7% in the first quarter of this year. The US dollar index rose 2.9% to 104.31 during the quarter.
The pound was stable at $1.2621, largely stable in the quarter, down just 0.8%.
Bank of England policy committee member Katherine Mann said on Tuesday that she had changed her mind last week to voting to keep interest rates on hold instead of raising them because consumers were becoming more stingy. But she still believes financial markets have priced in too many rate cuts.
Expectations for interest rate cuts weighed on the New Zealand dollar, which fell 5% against the dollar during the quarter in Asian trade, holding at $0.60.
New Zealand's Treasury lowered its economic growth forecast on Tuesday.
Analysts at Westpac recommend a short position in the Kiwi, noting that “USD momentum is positive and recent New Zealand data has been weak.”
(Reporting by Tom Westbrook; Editing by Sam Holmes)