Dollar on the defensive after soft data, yen hit below the clock by Reuters
Written by Brigid Riley
TOKYO (Reuters) – The dollar retreated on Thursday after U.S. economic data continued to point to slower growth, providing limited relief to the yen, already pegged near a 38-year low as the market warned of government intervention. .
The euro and sterling both rallied to three-week highs against the greenback, as voters went to the polls in the UK later in the day and investors awaited the second round of voting in France on Sunday.
The , which measures the greenback against a basket of peers, was near a low of 105.32 after briefly weakening to its lowest since June 13 at 105.04 on Wednesday.
Softer-than-expected US economic data on Wednesday, including a weak services report and ADP employment report, pointed to a slower economy, following an increase in initial claims for jobless benefits last week.
“Slowly, what we are starting to see is an opportunity for US economic data to flow,” said Rodrigo Catril, senior financial strategist at National Australia Bank (OTC:) (NAB).
The minutes of the Fed’s June meeting acknowledged that the US economy appears to be slowing and “price pressures are easing.”
A string of weak economic data has priced markets into a roughly 68% chance of a US rate cut in September compared to 56% last week, according to the CME FedWatch tool.
The dollar’s decline helped the yen edge up 0.12% higher against the greenback to 161.53.
Traders were also seen adjusting positions ahead of Friday’s farm unemployment report, said Marito Ueda, general manager of the market research department at SBI Liquidity Market.
“As the employment-related indicators spread more strongly on Wednesday (US), I think traders are less afraid that tomorrow’s jobs data will also come in softer than expected.” Nonfarm payrolls are expected to show an increase of 190,000 jobs in June after an increase in job prices. 272,000 in May, according to a Reuters poll of economists.
But the Japanese currency was still stuck close to 161.96 per dollar in the previous session, the lowest since December 1986, and fundamentals piled up against the yen.
Traders were bracing for possible Japanese government intervention as US markets closed for the Fourth of July holiday. The previous two rounds of Tokyo yen buying occurred during off-peak points on the global trading day or reduced holiday trading.
The barrier to intervention may be high at this stage, says Ueda of SBI Liquidity Market.
“The Ministry of Finance says that the thing that causes intervention is not the level but if there are excessive moves. It is difficult to intervene as the current moves do not fall into that category.”
POLITICS IN THE MIDDLE
Ahead of the US jobs report, traders looked to the UK election later on Thursday.
Britain looks set to choose Labor Party leader Keir Starmer as its next prime minister when voters go to the polls, sweeping Rishi Sunak’s Conservatives from office after 14 often tumultuous years.
“There is a sense that a government with a new majority and authority that may be a little closer to Europe may provide a fertile environment for the economy, and that should be good,” said NAB’s Catril.
Sterling held firm after gaining against the dollar overnight, trading at $1.2739.
The euro was down 0.02% at $1.0784, off its highest since June 12 against the greenback touched on Wednesday.
Among cryptocurrencies, bitcoin slipped 1.2% to $58,820.78, after sliding to a two-month low of $57,843 earlier in the trade.
Ether stumbled to $3,172.60, its lowest since May 20, and ended up 0.8% lower at $3,228.88.
(This story was reposted to correct the spelling of the commenter’s name, in section 9)
