The dollar is stable as bets increase on interest rate cuts in June

The dollar was broadly stable on Monday, as data showing a decline in inflation in America reinforced bets that the US central bank might cut interest rates in June, while the yen fluctuated near the 152 level to the dollar, which reinforced traders’ concerns about possible government intervention.

The US Commerce Department’s Bureau of Economic Analysis said on Friday that the personal consumption expenditures price index rose 0.3% in February, compared to economists’ expectations in a Reuters poll for a rise of 0.4%.

The report also showed that consumer spending rose in February by the largest amount in just over a year, confirming the strength of the economy. Most markets around the world were closed on Friday, and European markets were also closed on Monday.

Federal Reserve Chairman Jerome Powell said on Friday that the latest US inflation data was “consistent with what we would like to see,” in comments that matched what he said after the bank’s monetary policy meeting last month.

The CME Group’s Fed Watch service showed that markets currently expect a 68.5% chance of a cut in interest rates by the US central bank in June, up from 57% at the end of last week. Traders expect cuts of 75 basis points this year.

Investors’ attention will currently be focused on the March employment data scheduled to be released at a later date, and it is expected that the labor market data, if it improves, will enhance the US Central Bank’s chances of starting a monetary easing cycle starting in June.

The euro fell 0.03% to $1.0787, hovering near the lowest level in more than a month at $1.0769, which it touched last week. The pound sterling settled in the latest trading at $1.2637, rising 0.12% during the day.

The dollar index, which measures the performance of the US currency against a basket of 6 major currencies, rose by about 0.057% to 104.54 points, close to the highest level in 6 weeks at 104.73 points that it touched last week.

Attention in the currency market turned to the yen, as its decline towards levels last seen in 1990 led to increased opportunities for intervention by the Japanese authorities. The yen touched its lowest levels in 34 years against the dollar at 151.975 on Wednesday and reached 151.395 to the dollar in the latest trading on Monday.

Japan intervened in the currency market in September 2022 and again in October of the same year, as the yen fell to its lowest level in 32 years at 152 to the dollar.

It is difficult to predict Japan’s direction regarding the yen now that the country’s fiscal year has ended, which means that the Bank of Japan does not need to worry about the impact of the yen’s sudden movement on balance sheets.

Finance Minister Shunichi Suzuki said on Monday that he would not rule out options against excessive movement of the currency and would respond with appropriate measures, reiterating his warning about rapid movements of the yen.

The Chinese yuan fell on Monday under pressure from the dollar, even at a time when China’s latest data indicated that the economic recovery was gaining momentum and that the efforts made by the central bank to stabilize the currency were continuing.

The yuan opened at 7.2227 to the dollar in spot transactions and recorded 7.2292 in the latest transactions, and the Chinese currency recorded 7.2508 to the dollar in foreign transactions.