Written by Lei Wee
SINGAPORE (Reuters) – The yen rose sharply on Thursday, driven in part by a general weakness in the dollar, but also by expectations for further interest rate hikes by the Bank of Japan later this year and by Japanese government officials' Initiatives also provided support.
On the underside, the Australian dollar soared after Thursday's data showed a strong rebound in February employment and a much lower-than-expected unemployment rate, with the labor market remaining tight.
The yen rose more than 0.5% to 150.46 yen to the dollar, reversing some of its steep decline following the Bank of Japan's policy change.
Analysts say factors supporting the yen's strength include growing expectations that the Bank of Japan will raise interest rates again in July or October, as well as a recovery in business confidence in the Japanese economy.
Earlier on Thursday, Japan's Finance Minister Shunichi Suzuki also said the government was in a “high crisis” position after the yen fell to a four-month low of 151.82 yen in the previous session, the weakest in decades. He stated that he is closely monitoring the trends in the foreign exchange market with a sense of confidence. low.
“I think there's a bit of a surprising situation going on… given that the yen has probably moved a little too fast for what Treasury officials would like,” said Moe Siong Sim, a currency strategist at ” he said. Bank of Singapore.
“That may also explain why USD/JPY has fallen.”
Still, the main factor remains as the Federal Reserve maintained its outlook for rate cuts this year in the face of upside expectations for inflation and did not strike as hawkish a tone as some investors had feared. It was the fall of the US dollar.
Chairman Jerome Powell said at the conclusion of the Fed's policy meeting on Wednesday that recent high inflation readings do not change the underlying trend to gradually ease price pressures in the United States. The central bank remained on track to cut interest rates three times this year, even as it expected inflation to slow slightly.
Traders are rushing to rebuild their bets on the Fed's easing cycle starting in June, with the market pricing in a 75% chance of a rate cut that month, compared with 59% a day earlier, the paper said. CME FedWatch Tool.
On Thursday, the euro and pound hit new one-week highs against the dollar, rising to $1.0939 and $1.2803, respectively.
“The Fed really wants to end up with a soft landing, with stronger growth, lower unemployment and higher inflation still at the median,” said Seema Shah, chief global strategist at Principal Asset Management. There is no change.”
“Mr. Powell has probably shown his card. He needs a good reason not to cut rates, not a reason to cut rates.”
The dollar index was little changed at 103.22, after falling more than 0.5% in the previous session.
With the Fed meeting over, attention now turns to the Bank of England's (BoE) interest rate decision later on Thursday, with the central bank expected to keep rates unchanged.
British inflation slowed in February, official figures showed on Wednesday, putting the Bank of England on track to start cutting borrowing costs later this year.
jobs surprise
A rebound in Australia's February jobs report and a fall in the unemployment rate boosted the Australian economy on Thursday.
Figures released by the Australian Bureau of Statistics on Thursday show net employment rose by 116,500 people in February from January, well ahead of market expectations for an increase of 40,000, while the unemployment rate stood at 3.7%. decreased.
The Australian dollar rose 0.6% to a one-week high of US$0.6626.
Rob Carnell, head of Asia Pacific research at ING, said: “Employment statistics have always been highly volatile and monthly statistics should not be read in isolation, but today's numbers are too strong to ignore.” said.
“Given this data, the[Reserve Bank of Australia]is probably quietly relieved that it didn't go further this week and adopt a full easing bias.”
The RBA left interest rates unchanged at its policy meeting earlier this week, reducing its tightening bias.
Elsewhere, the New Zealand dollar was last up 0.24% at $0.60965, but gains were capped by domestic data showing New Zealand's economy contracted slightly in the fourth quarter, pushing the country into a technical recession. It was done.
(Reporting by Rae Wee; Editing by Christopher Cushing and Jamie Freed)