By Laura Matthews
NEW YORK (Reuters) -The dollar rose to a seven-week high against the yen on Thursday, while sterling and the euro fell as the U.S. economy boiled, as traders look for more data that will strengthen the case for a Federal Reserve to strengthen interest rate cuts this year.
May retail sales reported this week were tepid and the labor market appears to be weakening. The number of Americans filing new claims for unemployment benefits fell last week but was still more than expected, data released Thursday showed, suggesting the labor market remained strong despite a gradual cooling.
“The US (purchasing managers’ index) could be more of a catalyst for a higher volatility day tomorrow, so we’ll be looking for that to round out the week,” said Helen Given, associate director of trading at Monex USA, in Washington .
The dollar hit its highest level against the yen since April 29 and was last up 0.51% at 158.89 yen in New York trading. Traders remain alert for signs of continued intervention by the Bank of Japan to boost a currency that hit a 34-year low in late April.
Yen markets have been in turmoil since a dovish Bank of Japan last week maintained its policy targets and said it plans to soon release a plan to reduce bond purchases.
“I think the market was somewhat disappointed in the Bank of Japan’s actions. It felt a bit like I was kicking the yen into the market again,” said Amo Sahota, director of Klarity FX, in San Francisco.
“Well, in that case we’ll just continue with the simple carry trade we’ve been doing so far. The Bank of Japan and the Ministry of Finance are probably getting a bit nervous or focusing on intervention risks again.’
Japan’s top currency diplomat Masato Kanda said earlier on Thursday that there is no limit to the funds available for currency interventions, Jiji News Agency reported.
Along with yen weakness, declines in the euro and sterling have supported the currency’s 0.4% rise to 105.61, tracking against six peers.
The euro last fell 0.34% against the dollar at $1.0708. It reached a session low of 1.0706, but remained above Friday’s six-week low of $1.0667.
Sterling fell 0.42% to $1.2667 after hitting a five-week low in afternoon trading. Earlier in the day, the Bank of England left rates unchanged, with some policymakers saying their decision not to cut was “balanced”.
The Swiss franc also fell after the Swiss National Bank cut interest rates to 1.25%, following a cut in March.
The dollar rose 0.7% to 0.8909 francs, while the Swiss currency fell from around a three-month high after the rate cut, which came with forecasts calling for a further drop in inflation to 1.1% in 2025 predicted.
The dollar index rose after a volatile ten days, with mixed US economic data and political uncertainty in France roiling European markets.
“All things considered, it looks like the dollar is heading for its fifth straight week of gains simply because the economic situation in the US is not as bad as that of many of its peers,” Given said.
In cryptocurrencies, bitcoin rose about 0.4% to $65,105.
