Written by Brigid Riley
TOKYO (Reuters) – The dollar rose to a five-month high against major currencies on Tuesday after better-than-expected U.S. retail sales as the yen languished at its lowest since 1990. , concerns about Japanese government intervention grew.
The yuan weakened slightly, even after China’s first-quarter gross domestic product (GDP) data beat expectations and provided a boost to policymakers looking to shore up confidence in the face of a protracted real estate crisis. It became.
Data on Monday showed U.S. retail sales rose 0.7% last month, compared with economists’ expectations for a 0.3% rise in a Reuters poll. February data has been revised upwards, with sales rebounding 0.9%, the biggest increase in more than a year and well above the 0.6% reported in the previous report.
After strong job gains in March and consumer inflation picking up, the latest indicators raise further questions about when the Federal Reserve will start cutting interest rates.
Markets are currently pricing in a 41% chance that the Fed will cut rates in July, compared to about 50% before the data release, according to the CME FedWatch tool. The chance of a first rate cut in September has risen to nearly 46%.
“Assuming we’re all looking at the same data, I don’t think there’s any chance of a rate cut in July,” said Matt Simpson, senior market analyst at Citi Index.
Confirming the market view, San Francisco Fed President Mary Daly said late Monday that there was “no urgency” to cut interest rates in the United States.
On Tuesday, the U.S. dollar index hit 106.39, its highest since Nov. 2.
Due to the strong dollar, the yen exceeded 154 yen to the dollar, hitting its lowest level in 34 years.
As a result, traders remained wary of intervention by the Japanese authorities to buy the yen. Hedge funds have piled up their biggest bets against the yen in 17 years, and a rebound in the currency could trigger a big rally.
Japan’s Finance Minister Shunichi Suzuki said in Tokyo on Tuesday that he was closely monitoring currency developments and would take “thorough measures if necessary.”
The yen has recently hovered around 154.26 yen to the dollar, close to a new resistance level of 155 yen.
Citi Index’s Simpson said that despite the verbal warning, market forces were likely to push the pair higher as “the test of 155 looks too attractive”.
“How the government reacts around that level should be a good indicator of whether (Japanese authorities) have stopped intervening.”
Although the onshore yuan fell to 7.2422 yuan to the dollar, the lowest since November, official statistics showed that China’s economy grew 5.3% year-on-year in the first quarter, comfortably exceeding analysts’ expectations. The market picked up after it was shown that
However, the country’s retail sales were weaker than expected, a worrying sign for consumer confidence and a reflection of the economy’s uneven recovery.
The yuan recently traded at 7.2376 yuan to the dollar, but the decline was limited by strong gross domestic product (GDP) data and support from state banks.
The euro continued to fall after the European Central Bank last week opened the door to interest rate cuts in June, hitting $1.060625, its lowest since Nov. 2.
The Australian dollar fell to $0.64085, its lowest since November 14, and the kiwi similarly fell to $0.58735, its lowest in five months.
Bitcoin fell about 1% to $62,550.00.
(Reporting by Brigid Riley; Editing by Stephen Coates, Neil Frick and Christian Schmollinger)
