Written by Brigid Riley
TOKYO (Reuters) – The dollar on Tuesday edged closer to its highest level against some of its peers since early November, while the yen rallied for the first time since 1990 after U.S. retail sales beat expectations. Concerns about intervention grew as prices slumped to lows.
Market attention will also be on the Chinese yuan, with a number of key economic indicators to be released from China this morning in Asia expected to show the world's second-largest economy slowed in the first quarter. was.
U.S. retail sales rose 0.7% last month, compared to economists polled by Reuters who had expected a 0.3% rise. Data for February has also been revised upward, with sales increasing 0.9% instead of the previously announced 0.6% increase, the largest increase in more than a year.
After strong job gains in March and consumer inflation picking up, the latest indicators raise further questions about when the Federal Reserve will start cutting interest rates.
Markets are currently pricing in a 41% chance that the Fed will cut rates in July, compared to about 50% before the data release, according to the CME FedWatch tool. The chance of a first rate cut in September has risen to nearly 46%.
“Assuming we're all looking at the same data, I don't think there's any chance of a rate hike in July,” said Matt Simpson, senior market analyst at Citi Index.
“The US dollar was once again the strongest foreign exchange major on Monday, coupled with safe-haven flows from headlines in the Middle East and a clear reduction in expectations for Fed rate cuts.”
Following this statistics, the US dollar index hit 106.27, the highest since November 2nd. Last time it was hovering around 106.23.
The Japanese yen has slumped due to the continued strength of the dollar and the large interest rate differential between the two countries, and on Monday it exceeded 154 yen against the dollar, hitting a new 34-year low.
Traders were on alert for signs of intervention by Japanese authorities to buy the yen. Hedge funds have piled up their biggest bets against the yen in 17 years, and a rebound in the currency could trigger a big rally.
Japan's Finance Minister Shunichi Suzuki said on Tuesday he was monitoring currency movements closely and would take “thorough measures if necessary” after the dollar soared to a 34-year high.
The yen has recently been hovering around 154.29 yen to the dollar, not far from the new resistance level of 155 yen.
Citi Index's Simpson said that despite the verbal warning, “the 155 test looks too attractive” and market forces are likely to push the pair higher.
“How the government reacts around that level should be a good indicator of whether (Japanese authorities) have stopped intervening.”
Elsewhere, the euro hit $1.06018, its lowest since Nov. 3, as the currency continued to fall after the European Central Bank last week opened the door to a June interest rate cut.
The Australian dollar also hit a new low against the US dollar on Tuesday, dropping to US$0.6429, its lowest since November 14.
The kiwi fell 0.12% to a five-month low of $0.593.
The offshore Chinese yuan was little changed at 7.2620 yuan to the dollar ahead of the release of key economic indicators from China.
Among cryptocurrencies, Bitcoin was last up 0.05% to $63,171.00.
(Reporting by Brigid Riley; Editing by Stephen Coates)