The dollar hit a 4-1/2-year peak against the yen on Thursday, extending gains after strong US retail sales data the previous day reinforced expectations the Federal Reserve would not cut interest rates this year. That view could be further supported by any upside surprises in US producer prices at 1230 GMT or Friday's consumer prices.
The pricing out of Fed rate cuts has sent US Treasury yields to five-year highs this week, further supporting the dollar. "The dollar will remain supported as long as yields remain firm. The robust retail sales also supported the dollar. If the CPI is pretty strong the market may even think about rate hikes in the US," said Antje Praefcke, currency strategist at Commerzbank Corporates & Markets.
By 1114 GMT, the dollar was up a quarter percent to 122.94 yen, having earlier hit 123.03, according to Reuters data. Such levels have not been seen since December 2002, when it had risen as high as 125.70 yen. Benchmark Treasury yields were steady on Thursday, hovering near five-year peaks hit the previous day.
The dollar held steady at $1.3307 per euro, having hit an 11-week high on Wednesday. The yen fell versus the euro to 163.58 yen, as investors re-entered carry trade investments where cheap borrowing in yen funds purchases of higher yielding units.
The Bank of Japan is widely seen keeping rates at 0.5 percent on Friday, but with expectations running high for a hike in August, investors will closely watch the post-meeting news conference by BOJ Governor Toshihiko Fukui.
The Swiss franc, another low yielder, failed to get a boost from a widely expected interest rate hike or from upward revisions to Swiss National Bank's growth and inflation views.
"The SNB may see the domestic economy is in excellent shape but so is every other economy. So there is no room for (franc) out-performance," said Adrian Hughes, currency strategist at Societe Generale. Rises in stock markets on Thursday boosted risk appetite, further encouraging carry trades. From the United States, May PPI data are due, while Fed Board Governor Randall Kroszner is due to speak in Washington at the same time.
Comments
Comments are closed for this article.