Dollar edges up after pullback amid caution as finance ministers meet

TOKYO: The dollar rose on Thursday in support of hopes of a monetary tightening from the Federal Reserve, but may well have risen from the previous day’s peaks amid panic about what a gathering of finance ministers might say about its rapid appreciation. was far from

The greenback rose 0.36% to 128.335 yen, after hitting a two-decade high of 129.430 on Wednesday, as the Bank of Japan (BoJ) stepped into the bond market for the third time in three months to defend its zero-percent yield target . , a stark contrast to the Fed’s increasingly emboldened.

The dollar index – which measures the currency against six peers including the yen – ticked up 0.11% to 100.45, after retreating from a more than two-year peak of 101.03 in the previous session.

As well as allowing the dollar to ease overnight, benchmark Treasury yields bounced back near 3% from their high since December 2018 as dip buyers emerged. However, these yields were even higher in Tokyo trading on Thursday.

“This year some central banks will match the Fed for policy hikes and balance sheet pruning, creating a dramatic policy gap in favor of the USD,” Westpac strategists wrote in a client note.

Dollar index “should remain bid in this environment, talk of 101-102 is likely to rise in the near term,” he said.

San Francisco Fed Chair Mary Daly said Wednesday that she believes the case for a half-cent rate hike next month is “absolute” and “solid,” adding to the recent comments from other Fed officials of a larger rate hike. support is included.

The markets are currently up for a half-point increase in both May and June.

In contrast, the BoJ on Wednesday offered to buy unlimited amounts of 10-year Japanese government bonds for four consecutive sessions as yields jumped around its zero-percent target against a 0.25% maximum discount, further ultra-aging. Showing commitment to incentive settings. its policy meeting next week

BOJ Governor Haruhiko Kuroda has stuck to the idea that a weak yen is good for the economy as a whole, but acknowledged earlier this week that the moves were “quite sharp” and could damage Japanese companies’ business plans .

Finance Minister Shunichi Suzuki said more clearly on Tuesday that the damage to the economy from the weaker yen outweighs the gains in his strongest statement currently.

He is due to meet US Treasury Secretary Janet Yellen on the sidelines of the Group of 20 Financial Leaders’ Group in Washington DC this week, prompting traders to withdraw bearish yen bets on strong rhetorical potential on the currency.

Japanese policymakers have “not yet fully utilized their verbal intervention toolkit – the next step will typically involve describing the moves as ‘speculative’ and threatening to ‘take decisive action,'” RBC Written by Adam Cole, Chief Currency Strategist at Capital Markets. research note.

“If we get to that point, the barrier to the next logical step of physical intervention may be lower than typically anticipated.”

But whether the intervention would work, he said, it could “restore some of the short-term balance in the markets and manage the pace of JPY depreciation (but) over the long term, the BOJ’s not all of the JPY selling we anticipate.” The Fed hiking cycle is going well from within Japan.”

Elsewhere, the euro fell 0.11% to $1.08425, while sterling was down 0.14% to $1.30555.

The Australian Dollar retreated 0.20% to $0.7436.

The New Zealand dollar fell 0.40% to $0.67755, which was softer than consumer price data.

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