By Gertrude Chavez-Dreyfuss and Harry Robertson
NEW YORK/LONDON (Reuters) – The Japanese yen rose against the dollar for a fourth straight session on Thursday, hitting a 2.5-month high as investors unwound long-term bets against the currency, ahead of a Bank or Meeting Japan next week.
The unwinding of short bets against the yen, the funding currency used in carry trades, came as a plunge in global stock markets in recent sessions, driving investors towards traditionally safe assets such as the Swiss franc and the Japanese currency. However, US stocks recovered on Thursday after a steep sell-off during the previous session.
In a carry trade, an investor borrows in a currency with a low interest rate and invests the proceeds in higher-yielding assets.
However, the dollar pared losses against the yen and euro after data showed the world’s largest economy grew faster than expected and inflation slowed in the second quarter, raising expectations of a bigger-than-expected rate cut in September or whether a Federal Reserve easing in September was in doubt. week meeting.
The dollar last fell 0.1% on the day at 153.63 yen.
The interest rate futures market has priced in a 67.2% chance that the BOJ will raise rates next week, up from about 40% earlier this week, according to LSEG estimates.
“I think the yen shorting has run its course,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York. “That should take pressure off the (Australian dollar) and the (New Zealand dollar), which have suffered heavily this week, as well as the Mexican peso.”
The euro rose slightly against the dollar at $1.0852, down 0.1% at 104.27. The index stood at 104.21 just before the figures were published.
Previous estimates showed that US gross domestic product (GDP) grew at an annual rate of 2.8% last quarter. Economists polled by Reuters had forecast GDP rising 2.0%.
The personal consumption expenditure (PCE) price index, excluding volatile food and energy components, rose 2.9% after rising 3.7% in the first quarter.
FOR HIMSELF
“The market has been leading the Fed cuts. Before the GDP number, the market is pricing as if the Fed is going to cut 50 basis points in September,” Chandler said.
He also cited comments from former New York Fed President Bill Dudley in a Bloomberg column on Wednesday, who said the Fed should cut rates next week, citing recent employment data.
“But the GDP number shows the Fed has no such urgency,” Chandler said. “The market estimates a less than 10% chance of a cut next week.”
The Fed remains firmly on track to cut rates in September, according to Fed Funds futures data. Based on LSEG calculations, the futures market has also priced in about 70 basis points (bps) of cuts this year.
The US unemployment benefits data was also consistent with a trend in the stable economy.
Initial jobless claims fell by 10,000 to a seasonally adjusted 235,000 for the week ending July 20, the data showed. Economists polled by Reuters had forecast 238,000 claims for the past week.
The only negative, however, was the US durable goods report, which showed durable goods orders fell 6.6% in June, compared to expectations for a 0.3% increase.
In other currencies, the Australian dollar fell to $0.6519, its lowest level since early May. It last fell 0.5% against the dollar at US$0.6547.
rose against the dollar, which fell to its lowest level since early May at 7.234, while the yen’s rally spilled over into the Chinese unit.
The rise came even as the country’s central bank surprised markets for a second time this week by carrying out an unplanned borrowing operation on Thursday at sharply lower interest rates and more monetary stimulus to support the economy.
Currency
bid
prices at
July 25
02:59
pm GMT
Description RIC Last US Pct YTD Pct High Low
change bid at Close
Last
Session
Dollar 104.26 104.38 -0.1% 2.85% 104.45 104.
index 07
Euro/pop 1.0854 1.084 0.14% -1.66% $1.0859 $1.0
ar 829
Dollar/Year 153.65 153.86 -0.16% 8.91% 154.16 151.
n 96
Euro/yen 1.0854 166.79 -0.02% 7.15% 167.22 164.
83
Dollar/SW 0.8798 0.8852 -0.6% 4.54% 0.8854 0.87
iss 78
Sterling/ 1.2875 1.2906 -0.23% 1.19% $1.2913 $1.0
Dollars 829
Dollar/Approx. 1.3816 1.3808 0.07% 4.24% 1.385 1.38
Nadian 05
Australia/Thurs 0.6552 0.6582 -0.43% -3.89% $0.6582 $0.6
lar 511
Euro/Swiss 0.9549 0.9594 -0.47% 2.83% 0.9598 0.95
s 22
Euro/Star 0.8429 0.8397 0.38% -2.76% 0.8431 0.83
ling 95
New Zealand 0.5903 0.593 -0.45% -6.58% $0.593 0.58
Dollar/Do 73
llar
Dollar/no 11.0308 11.0265 0.04% 8.84% 11.1381 10.9
road 949
Euro/Norwegian 11.9683 11.953 0.13% 6.63% 12.0856 11.9
yes 317
Dollar/ZW 10.8032 10.7772 0.24% 7.31% 10.8685 10.7
Eden 65
Euro/Sweden 11.7267 11.6822 0.38% 5.4% 11.7786 11.6
en 784
