By Alun John and Ankur Banerjee
SINGAPORE/LONDON (Reuters) -The Japanese yen was steady on Tuesday and the Swiss franc was also softer after some of the most notable moves in recent days reversed somewhat, and a hint of calm returned to markets.
The dollar was last at 144.75 yen, up 0.3% on the day, the first day it traded higher against the Japanese currency this month but still down 10 yen over the past week.
The reassessment also took place in stock markets, with Japan’s benchmark index rising 10% on Tuesday after falling 12% the day before, while stocks in Europe also tried to recover. [MKTS/GLOB]
“We believe the markets have gotten a bit ahead of themselves, and they realized that this morning. That’s why we’ve seen the dollar rise and the dollar/yen move back up,” said Monex currency analyst Nick Rees . Europe.
The yen’s recent gains have been driven by a rise in volatility, forcing investors to withdraw from once-popular carry trades, reinforced by the Bank of Japan’s rate hike on Friday.
That combined with softer-than-expected U.S. jobs data, also on Friday, and disappointing earnings from big tech companies led to a global sell-off in stocks, further exacerbating the carry reduction.
The Swiss franc weakened on Tuesday and the dollar rose 0.45% to 0.85545 francs.
Like the yen, the franc is a favorite financing currency for carry trades. Since mid-July, the price has strengthened sharply as these trades unwound, with gains boosted Monday by safe-haven flows.
The dollar also regained ground against the euro and pound, with the common currency down 0.24% to $1.0926 after hitting a seven-month high of $1.1009 during Monday’s unrest.
“The dollar did not act as a safe currency on Monday, and you can’t put everything in the franc or yen, and the next currency on that list is normally the euro,” Rees said.
Sterling fell 0.3% to $1.274.
Also underlying the moves in the currency market are traders’ attempts to praise US Federal Reserve policy at upcoming meetings.
Traders now expect an easing of 110 basis points (bps) this year from the Fed, factoring in an 80% chance of a 50 basis point cut in September. Traders had fully priced in a 50 basis point cut on Monday.
U.S. central bank policymakers on Monday pushed back against the idea that weaker-than-expected July employment data means the economy is in freefall from a recession, but also warned that the Federal Reserve will have to cut interest rates to avoid a recession. prevent such an outcome.
The Australian dollar was last flat at $0.6492, having previously risen following comments from Reserve Bank of Australia Governor Michele Bullock suggesting interest rate cuts were further away.
The Australian central bank kept interest rates steady on Tuesday as expected, but reiterated that it was not making any adjustments to keep inflation under control.
