The US dollar rose against the yen and stabilized against major currencies today, as traders awaited the release of US economic data to assess its impact on the likelihood of a larger-than-expected rate cut, while a rally in Japanese stocks helped halt exit losses from yen’s interest rate trade deals. The yen fell for the second consecutive day as business conditions eased ahead of the release of U.S. inflation data, while sterling rose after figures showed that Unemployment in Britain unexpectedly fell in June. The dollar rose 0.33% to 147.72 yen, after briefly touching a one-week high of 148.23 yesterday ahead of a wave of profit-taking, according to Reuters. Currency markets have been hit hard by a sharp appreciation of the yen since July, which has led to the dismantling of a popular investment strategy called pregnancy trading and contributed to the fall in stocks. Kamal Sharma, chief foreign exchange strategist at Bank of America, said: “The general feeling is that there is life in this interest trade, and the movements against the backdrop of deteriorating US data are probably excessive, and fears of a US recession are certainly exaggerated.” The yen fell to 38-year lows in July/July as investors flocked to trade Interest where they borrow yen in Japan where interest rates are low and then sell it for other currencies to buy higher-yielding assets elsewhere. A number of factors, notably a surprise rate hike by the Japan Bank and expectations of a US rate cut due to a slowing labor market, have contributed to reversing interest trade, sending the yen up around 8% since mid-July July. Government sources told Reuters Japan’s parliament plans to hold a special session on Aug. 23 August to discuss the central bank’s decision last month to raise interest rates.
US dollar awaits US inflation data
The US dollar index witnessed some stability during today’s trading, and this comes in conjunction with the dollar’s anticipation of the release of US consumer price data this week, which will strongly affect its trading, and the following are the most important influences on the dollar’s movements today: US Federal Reserve member’s statements support the dollar The dollar received some support due to the statements of the US Federal Reserve, Michelle Bowman, in which she indicated that she still sees upside risks to inflation along with the continued strength of conditions in the US labor market, which raises doubts about whether the US Federal Reserve is ready to start cutting interest rates at the September meeting Also, the Fed member indicated that progress in the battle to reduce inflation during May and June is a welcome development, but inflation is still (uncomfortably) above the Fed’s target. The US dollar was under clear pressure during trading in conjunction with the absence of important economic data, but weak US bond yields damaged the performance of the dollar index, as the US 10-year bond yield fell by 0.23% and settled near 3.935 levels The US dollar index is awaiting the release of the consumer price index this week, and this index is set to have a significant and strong impact on the movements of the US dollar, and expectations indicate that US inflation will grow by 0.2% on a monthly basis during last July, and to stabilize at 3.0% year-on-year levels in July, therefore, these upcoming data may have a significant reflection on the monetary policy decisions of the US Federal Reserve during the month of September, which will necessarily affect the movements of the US dollar.
How does upcoming economic data affect strength of dollar?
The upcoming economic data is one of the most important factors affecting the strength of the US dollar in global financial markets. This effect is manifested in how investors and markets react to new information regarding the economic health of the United States. When economic data, such as economic growth reports, unemployment rates, or inflation data, are released, markets analyze this information to determine its potential impact on monetary policy .and the economy in general, which in turn is reflected in the value of the dollar. One of the primary indicators affecting the dollar’s strength is the monthly payrolls report, also known as the Nonfarm Payrolls report. This report provides vital information about how strong the U.S. labor market is, including the number of jobs added or lost and the unemployment rate. When the report shows a strong increase in the number of jobs or a decrease in the unemployment rate, it is considered evidence of the strength of the US economy. As a result, the Investors the Federal Reserve raised interest rates to keep pace with economic growth, boosting the dollar’s strength because raising interest rates makes dollar investment more attractive to foreign investors. Conversely, if economic data shows weakness in the labor market, such as a decrease in the number of jobs or a high unemployment rate, this could raise fears of a possible economic slowdown. In this case, investors may expect the Fed to take a more loose monetary policy, such as cutting interest rates or expanding stimulus programs. This may lead to a weaker dollar due to lower potential returns from dollar investments.
