Dollar Maintains Stability Following Robust U.S. Data, Yen Hovers Near 150 Level

The dollar exhibited resilience on Monday, extending its upward trajectory for the fifth consecutive week, propelled by robust U.S. inflation data. Meanwhile, the Japanese yen lingered near the psychologically significant 150 level.

U.S. markets observed the Presidents’ Day holiday, contributing to the expectation of low trading volumes throughout the day. The dollar index, which tracks the currency against six major counterparts, held relatively steady at 104.18, following a 0.18% gain in the previous week. Last Tuesday, it reached its highest point since mid-November at 104.97, responding to stronger-than-expected U.S. inflation data for January. This prompted investors to revise down their expectations for Federal Reserve interest rate cuts this year. However, the dollar retreated on Thursday after reports revealed a decline in retail sales for the previous month.

The euro experienced a slight increase, reaching $1.0783 and rebounding from a three-month low of $1.0695 the previous week. Similarly, sterling gained 0.17% at $1.2621.

Investors are keenly awaiting the release of minutes from the Fed’s latest meeting on Wednesday, which is expected to be the key highlight for the week. Market expectations for Fed rate cuts this year have reduced to around 90 basis points, marking a significant drop from approximately 145 basis points at the beginning of February.

The dollar declined by 0.19% against the yen on Monday, reaching 149.94 yen. The dollar has maintained a 6% gain against the yen this year, attributed to Japan’s continued ultra-loose monetary policy. This policy has created a notable yield gap between the two countries, enhancing the attractiveness of the dollar. The ongoing rally has sparked speculation about potential intervention by Japanese authorities to bolster their currency. Finance Minister Shunichi Suzuki expressed concerns about “rapid moves” being undesirable for the economy.

Weekly data from the U.S. markets regulator revealed an increase in speculators’ net short position against the yen, reaching a more than two-month high of $9.2 billion.

China’s onshore yuan showed minimal movement as investors returned from the week-long Lunar New Year break, maintaining a rate of around 7.1987 per dollar.

In other developments, the dollar experienced a 0.33% decline against Sweden’s crown, settling at 10.407 per dollar, following reports of a slight uptick in headline Swedish inflation for January.