Dollar posts weekly loss as yen jumps amid shifting rate bets
The Japanese currency posted its best week since July, gaining about 2.4% against the dollar.
The dollar experienced a weekly decline in September as mixed signals from the Federal Reserve left traders uncertain ahead of a key inflation report. The Bloomberg Dollar Spot Index fell 0.7% by week's end, despite a stronger-than-expected jobs report that initially boosted hopes of a Federal Reserve rate hike later in the month.
Traders now anticipate a 60% chance of a quarter-point rate increase, up from near-even odds prior to the report. Noah Buffam, a strategist at CIBC Capital Markets, noted that the following week’s consumer price data will likely determine the next trend for the dollar. Earlier in the week, the greenback reached its weakest level since May after Federal Reserve Governor Christopher Waller signaled progress on inflation, reducing expectations for an immediate interest rate increase.
Waller’s speech was deemed more dovish than anticipated by many market observers. The yen surged during the same period, gaining nearly 2.4% against the dollar, driven by expectations of a Bank of Japan rate hike this month, with the possibility of further increases in the future. Job growth surged in August, while the unemployment rate remained unchanged at 4.1%.
The upcoming consumer-price report next week could solidify expectations for the Fed’s next action and, consequently, the dollar’s trajectory. If the data remains stronger than expected, the dollar may have room to rally in the near term. However, an in-line inflation print would likely support the Fed in avoiding a September hike, maintaining a bearish outlook for the dollar.
Market positioning has shifted more pessimistic towards the greenback, with options data indicating a bearish stance on the trade-weighted dollar. Strategists are also predicting continued weakness for the dollar, with Bank of America advising a sell position against the yen, projecting the Japanese currency to strengthen to ¥149 per dollar by year-end. TD Securities maintains a moderately bearish outlook for the dollar over the next year.
Written by urgent.news from Japan Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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