By Laura Matthews
NEW YORK (Reuters) – The U.S. dollar weakened against the yen on Thursday as softer-than-expected U.S. economic data and growing confidence in a Bank of Japan interest rate hike sent the dollar tumbling to its lowest in nearly a year. month against the Japanese dollar. currency.
Recent comments from BOJ Governor Kazuo Ueda and his deputy Ryozo Himino have made it clear that an increase will at least be discussed at next week’s policy meeting. The markets see about a 79% chance of a 25 basis point increase.
Annual wholesale inflation in Japan held steady at 3.8% in December due to persistently high food costs, it showed on Thursday.
The dollar fell 0.81% against the yen to 155.2, the lowest level since December 19.
“We expected to see nuanced behavior from the U.S. dollar, likely to be stronger against a number of currencies but weaker against the Japanese yen,” said Kristina Hooper, chief global markets strategist at Invesco US. “I think the general direction for the JPY and the general direction for the dollar indicate that we will have a stronger yen against the dollar.”
The dollar was weaker against the euro, which rose 0.1% to $1.03, as traders digested a slew of mixed economic news to gauge the prospects for Federal Reserve rate cuts this year.
U.S. retail sales rose 0.4% last month, following upward revisions from the previous month, data from the Commerce Department’s Census Bureau showed.
Meanwhile, the number of Americans filing new claims for unemployment benefits rose more than expected last week but remained at levels that indicate a healthy labor market.
The Philadelphia Fed Business Index, which rose to 44.3 in January, was the only surprise as the forecast predicted a reading of minus 5.
That left – a measure of the dollar’s value against a basket of foreign currencies – down 0.05% at 108.97.
Amo Sahota, managing director of Klarity FX in San Francisco, said Wednesday’s softer consumer price data continues to set the tone in markets, raising expectations that the Fed will still aim for two rate cuts this year.
But the sign of disinflation occurs when inflation could escalate again depending on the new government’s trade policies.
“Markets are generally in a slightly more optimistic mood, but here they remain holding until Monday,” Sahota said.
That’s when Donald Trump returns to the White House with policies that analysts expect will boost growth and increase price pressures.
Another point of interest for markets on Thursday was the hearing on Trump’s choice of Scott Bessent to head the Treasury Department.
Bessent is expected to keep US deficits in check and use tariffs as a negotiating tool, mitigating the expected inflationary impact of economic policies expected from the Trump administration.
“So far he hasn’t really said anything that deviates too far from what we expected,” Sahota said. “This is a government … that has to sort itself out in terms of spending. So we’re looking forward to seeing government spending come down. They really want to bring back the tax cuts, we’ve seen that headline.”
Traders increasingly worried about inflation reacted with relief to Wednesday’s U.S. data, buying stocks and sending 10-year Treasury yields down more than 13 basis points.
Treasury yields fell on Thursday after Federal Reserve Governor Christopher Waller said three or four rate cuts were still possible this year if US economic data weakened further.
Sterling fell 0.13% to $1.2228 against the dollar, after also falling sharply against the yen on Thursday, as investors focused on divergences in monetary policy following the government bond sell-off and the pound last week.
seen on the front lines of rate risk, was at the weak end of its trading band at 7.3316. [CNY/]
Currency
bid
prices at
16
January
08:54
pm GMT
Description RIC Last US Pct YTD Pct High Low
at Close Change bid
Last
Session
Dollar 108.96 109.03 -0.05% 0.43% 109.4 108.
index 82
Euro/pop 1.0299 1.029 0.1% -0.51% $1.0315 $1.0
am 26
Dollar/Year 155.19 156.505 -0.83% -1.36% 156.42 155.
no. 135
Euro/yen 159.84 160.97 -0.7% -2.07% 161.08 159.
77
Dollar/SW 0.9111 0.9129 -0.18% 0.41% 0.9142 0.91
is
Sterling/ 1.223 1.2245 -0.09% -2.19% $1.226 $1.2
Dollars 173
Dollar/Approx. 1.4393 1.4339 0.39% 0.1% 1.4403 1.43
nadia 24
Australia/Thurs 0.621 0.6227 -0.24% 0.39% $0.6248 $0.6
lar 192
Euro/Swiss 0.9382 0.9389 -0.07% -0.12% 0.9394 0.93
s 71
Euro/Star 0.8418 0.8402 0.19% 1.75% 0.8438 0.84
ling 07
New Zealand 0.5606 0.5616 -0.11% 0.25% $0.5633 0.55
Dollar/Thurs 82
llar
Dollar/no 11.3595 11.3256 0.3% -0.05% 11.4002 11.3
road 108
Euro/Norwegian 11.701 11.6542 0.4% -0.58% 11.714 11.6
yes 48
Dollar/SW 11.1507 11.1536 -0.03% 1.21% 11.1937 11.1
Eden 288
Euro/Sweden 11.485 11.4806 0.04% 0.16% 11.499 11.4
en 75
(This story has been corrected to clarify that the size of a possible BOJ rate hike is 25 basis points, not 50 basis points, in paragraph 2)
