Dollar firm after Fed comments; yen under close watch

Speaking during late U.S. trading hours on Wednesday, Federal Reserve Governor Christopher Waller said recent disappointing inflation data affirms the case for the U.S. central bank holding off on cutting its short-term interest rate target.

"There is no rush to cut the policy rate" right now, Waller said in a speech prepared for delivery before an Economic Club of New York gathering.

The dollar index, a measure of the greenback against major peer currencies, ticked up in the wake of Waller's comments and last held mostly unchanged at 104.41. It's gained around 3% so far in 2024.

Market expectations for the first to occur at the Fed's June meeting have eased somewhat, currently pricing in a 60% chance compared to 67% around this time last week, according to the CME FedWatch tool.

Waller's speech is a "clue that the Fed is more wary of stickier inflation, perhaps even a re-acceleration in price growth, said Kyle Rodda, senior financial market analyst at Capital.com.

While the central bank has signalled willingness to look through some bumps along the way to some extent, Rodda perceives the case for rate cuts has on balance weakened.

"A strong inflation read tomorrow could throw into question whether market pricing for three cuts in 2024 is justified," which would be a positive for the dollar, he added.

Traders await key U.S. core inflation figures due on Friday, following a bigger-than-expected jump in U.S. durable goods orders on Tuesday that has already boosted the dollar against the yen.

The greenback reached 151.975 yen on Wednesday, its strongest against the yen since mid-1990.

The yen gained a little after Japanese authorities held a meeting on Wednesday on the currency's weakness, and top currency diplomat Masato Kanda said he "won't rule out any steps to respond to disorderly FX moves."

Finance Minister Shunichi Suzuki said earlier on the same day that authorities could take "decisive steps," language he hasn't used since Japan last intervened in 2022.

That's put the market on edge for any signs that authorities are backing up words with action.

"It's unlikely anyone will pay 152.01 yen for USD/JPY today because of this risk," Ray Attrill, head of currency strategy at National Australia Bank, wrote in a note.

"But in the absence of intervention before the weekend, we strongly suspect someone will next week."

Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards a 32-year low of 152 to the dollar.

The Japanese currency was last pinned at 151.37 against the dollar.

Meanwhile, a summary of opinions at the Bank of Japan's March meeting released on Thursday showed policymakers were divided on whether the economy was strong enough to handle an exit from ultra-easy monetary policy.

Elsewhere, the euro was down 0.11% at $1.0814.. Sterling fell 0.17% to $1.2616.

In cryptocurrencies, bitcoin last rose 1.14% to $69,648.86.

Source: Forex-Markets-Economic Times