By Tom Westbrook
SINGAPORE (Reuters) – The dollar was higher on Wednesday and the yen fell near levels that prompted interventions last year after strong U.S. data sent yields up and reduced some bets on a Federal Reserve rate cut.
The yen touched 158.42 overnight, the yen’s weakest against the dollar in nearly six months, and was last at 158.19.
Japanese Finance Minister Katsunobu Kato warned against speculative selling of the yen a day earlier as the exchange rate approaches the 160 level that attracted dollar selling half a year ago.
“Even as far as the chart is concerned, that’s an important resistance level,” said Bart Wakabayashi, manager of the Tokyo branch State Street (NYSE:).
“We’re getting very strong numbers in the US … that are pushing rates up,” he said, pushing expectations of a Fed rate cut until the northern summer or later.
“There’s even a debate about whether it’s going to cut or maybe even increase? The narrative has changed quite a bit, leading to what should be maybe a little bit more strengthening of the dollar.”
The euro fell about 0.5% overnight to trade around $1.0351 during the Asian day. Sterling also fell to buy $1.2478. hit a six-month low of 7.3319 per dollar.
Traders are jittery ahead of U.S. labor force data due on Friday, as well as Inauguration Day on Jan. 20, when Donald Trump is expected to begin his second U.S. presidency with a series of policy announcements. and executive orders.
Data on Tuesday showed U.S. job openings rose unexpectedly in November, layoffs were low, service sector activity picked up in December and a measure of prices paid for inputs hit a two-year high – possible warning for inflation.
Bond markets responded with yields on the 10-year rising more than eight basis points to touch an eight-month high of 4.699%, while the yield on the 30-year rose 7.4 basis points to less than nine basis points of the broken 5%. [US/]
Traders are pricing in only about 37 bps of easing this year, according to LSEG data derived from forward rates.
The dollar followed suit, with the contrast between a solid US economy and weak data in Australia and New Zealand sending antipodean currencies to multi-year lows.
New Zealand is in a full-blown recession and, after losing more than 11% against the US currency last year, fell to $0.5634 on Wednesday, not far from the two-year low of $0.5588 reached in late December.
The Australian dollar has sunk 9.2% against the greenback through 2024 and, at $0.6228, is not far from breaking the 2022 low of $0.6170. Australian monthly inflation data showed headline CPI rose from three-year lows in November, although a drop in core inflation bolstered the case for a rate cut.
