Dollar Rises to Five-Month High, Yen Languishes at 34-Year Low
The US dollar surged to a five-month high against major currencies on Tuesday, fueled by stronger-than-expected US retail sales figures. This has raised concerns about potential intervention from Tokyo, as the Japanese yen continues to languish at its lowest level since 1990.
The Chinese yuan, meanwhile, edged slightly lower despite better-than-expected GDP data for China's first quarter. This provided a boost for policymakers aiming to bolster confidence amidst a protracted property crisis.
Robust US Retail Sales Raise Rate Cut Questions
The robust US retail sales data, showing a 0.7% increase in March compared to the expected 0.3%, has sparked questions about the timing of potential interest rate cuts by the Federal Reserve. This follows strong employment gains in March and a rise in consumer inflation.
Markets are now pricing in a 41% chance of a rate cut in July, compared to around 50% before the data. The likelihood of a cut in September has also increased to nearly 46%.
Yen at 34-Year Low, Intervention Speculation Mounts
The surge in the dollar has pushed the yen to its weakest point in 34 years, breaching 154 per dollar. This has put traders on high alert for potential yen-buying intervention from Japanese authorities.
With hedge funds building up their largest bets against the yen in 17 years, a rebound could trigger a significant rally. Japanese Finance Minister Shunichi Suzuki has stated that he is closely monitoring currency movements and will take appropriate action as needed.
Mixed Signals for Chinese Yuan
The onshore yuan fell to its lowest level since November, before recovering slightly after official data showed China's economy grew by 5.3% in the first quarter, exceeding analysts' expectations. However, retail sales missed expectations, raising concerns about consumer confidence and the uneven economic recovery.
The yuan is currently trading at 7.2376 per dollar, with losses limited by the positive GDP figures and state bank support.
Euro and Antipodean Currencies Slide
The euro continued its slump after the European Central Bank left the door open to a rate cut in June, reaching its weakest point since November 2. The Australian and New Zealand dollars also dropped to five-month lows against the US dollar.