Dollar Extends Gains as Japanese Officials Worry about Yen Depreciation

2022-06-13 10:17:41


At the beginning of the Asian market on Monday (June 13), spot gold rose slightly, reaching a high of more than one month to US$1,878.65 per ounce, as data on Friday showed that the US CPI in May recorded the largest annual increase since 1981. Gold's appeal has increased, as gold inflation is seen as one of the tools against inflation. In addition, the University of Michigan's initial U.S. consumer confidence index in June hit a record low, which also boosted gold's safe-haven buying demand. The U.S. dollar index also edged higher, hitting a four-week high of 104.45 at one point, as market expectations for a hawkish Fed rate hike this week increased after the CPI data. U.S. crude oil opened lower and moved lower, and is currently trading around 118.68. The market's worries about the Asian epidemic have rebounded, suppressing the demand outlook.

Treasury yields soared and the dollar extended gains as U.S. inflation hit a 40-year high in May and traders raised their forecasts for how much the Federal Reserve will raise interest rates next. The yen was largely flat on Friday after five straight days of losses, erasing intraday gains after rising as Japanese officials expressed concerns about the pace of the yen's depreciation.

The U.S. dollar index rose 0.83% to 104.17 on Friday, and extended gains on Monday (June 13), once refreshing a near four-week high of 104.45. As investors flock to safe-haven assets and the market expects the Fed to aggressively raise interest rates; data released by the U.S. Labor Department on Friday showed that the CPI rose 8.6% year-on-year in May, exceeding analysts' expectations of 8.3%. U.S. Treasury bond yields rose across the board, with short-term yields rising the most; 2-year Treasury yields are currently up 24 basis points to 3.05%; U.S. stock markets tumbled.

USD/JPY was flat on Friday; it fell 0.7% to 133.37 during the session; Japan's Ministry of Finance, Bank of Japan and Financial Services Agency issued a statement saying they were "concerned" about the recent rapid decline in the yen against the dollar and that they would "appropriately" if necessary "Take action on the exchange rate. In early Asian trading on Monday, the dollar against the yen once refreshed a more than 20-year high of 134.84, an increase of about 0.33%. The dollar will see a mild correction against the yen later this year, HSBC strategists wrote in a note, citing further debate over the Bank of Japan's yield curve control policy in the second half of the year and a potentially volatile risk appetite.

The euro fell as much as 1.1% to 1.0506 against the dollar on Friday; it extended losses on Monday, falling as much as 0.3% to 1.0485, refreshing a near one-month low. Jordan Rochester, FX strategist at Nomura, predicts EUR/USD falling to 1.04 with a stop loss of 1.0825, believing that "the near-term top of ECB-driven euro strength" has arrived, including the ECB's clear guidance for the next two meetings, and relative ECB , the market is pricing the Fed relatively dovish.

GBP/USD fell 1.43% to $1.2310 on Friday, falling for a second week in a row. Britain's gloomy economic outlook made investors nervous. GBP/USD extended losses on Monday, once refreshing a near one-month low of 1.2270 .

USD/CAD rose 0.66% to 1.2780 on Friday; Canada added more jobs than expected in May, the unemployment rate fell to 5.1%, and wages rose more than expected; USD/CAD rose 0.9% during the session.

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