FOREX-Yen jumps; Aussie gets a boost from strong jobs data

Credit: REUTERS/Florence Lo

By Rae Wee

SINGAPORE, March 21 (Reuters) - The yen rose sharply on Thursday in part due to a broadly weaker dollar, but also drew support from expectations of further rate hikes from the Bank of Japan later this year and some jawboning efforts from Japanese government officials.

The yen JPY=EBS gained more than 0.5% to 150.46 per dollar, reversing some of its heavy losses in the wake of the BOJ's policy pivot.

Analysts said factors supporting the yen's rise included growing bets of another BOJ rate hike in July or October, as well as a rebound in business confidence in the Japanese economy.

"I think there's a bit of jawboning going on... given that the speed of the yen move has probably been a bit too rapid for what the Ministry of Finance officials would like to see," said Moh Siong Sim, a currency strategist at Bank of Singapore.

"That may have explained why dollar/yen has come off as well."

At the conclusion of the Fed's policy meeting on Wednesday, Chair Jerome Powell said recent high inflation rate readings had not changed the underlying trend of slowly easing price pressures in the United States. The central bank stayed on track for three rate cuts this year, even though it projected slightly slower progress on inflation.

That sent the greenback tumbling as traders were quick to rebuild bets of a Fed easing cycle beginning in June, with markets now pricing in a 75% chance of a rate cut that month, as compared to 59% chance a day earlier, according to the CME FedWatch tool.

The euro EUR=EBS and sterling GPB=D3 notched one-week highs against the dollar on Thursday, rising to $1.0939 and $1.2803, respectively.

"The Fed really, really wants its soft-landing ending. Stronger growth, lower unemployment, higher inflation - and yet still no change to the median dot," said Seema Shah, chief global strategist at Principal Asset Management.

"Powell has perhaps shown his cards: he needs a good reason not to cut rates, rather than a reason to cut rates."

The dollar index =USD was little changed at 103.22, after having slid more than 0.5% in the previous trading session.

With the Fed meeting out of the way, focus now turns to a rate decision from the Bank of England (BoE) later on Thursday, where expectations are for the central bank to keep rates on hold.

British inflation slowed in February, official data on Wednesday showed, keeping the BoE on track to start cutting borrowing costs later this year.

JOBS SURPRISE

A resurgence in Australia's February employment figures and a downtick in its jobless rate gave the Aussie AUD=D3 a boost on Thursday.

"Employment data is always very volatile, and no single month of data should be read in isolation. However, today's figures are too strong to ignore," said Rob Carnell, ING's regional head of research for Asia-Pacific.

"In light of this data, (the Reserve Bank of Australia) are probably quietly relieved that they did not go further and adopt an outright easing bias this week."

The RBA had, at its policy meeting earlier this week, held interest rates steady and watered down its tightening bias.

Elsewhere, the New Zealand dollar NZD=D3 was last 0.24% higher at $0.60965, though its gains were capped by domestic data showing New Zealand's economy shrank slightly in the fourth quarter, putting the country into a technical recession.

World FX rates https://tmsnrt.rs/2RBWI5E

(Reporting by Rae Wee; Editing by Christopher Cushing and Jamie Freed)

((Rae.Wee@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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