Forex-Yen: Companies based on the confidence of the Bank of Japan and The Aussie gets a jobs boost

 The yen rose Thursday, partly due to broad dollar weakness, but it also received support from expectations of an interest rate hike from the Bank of Japan later this year and some efforts from Japanese government officials.

To the downside, the Australian dollar AUD=D3 jumped after data on Thursday showed employment rebounded sharply in February and the unemployment rate fell well below expectations, suggesting the labor market remains tight.

The Japanese yen rose nearly 0.7% to reach a session high of 150.265 to the dollar earlier in the day, reversing some of its heavy losses in the wake of the Bank of Japan's policy change this week.

It was high in most recent trading by 0.2% at 150.95.

The yen received support from a Nikkei newspaper report on increasing bets on another rate hike from the Bank of Japan in July or October, and Governor Kazuo Ueda also indicated on Thursday that the central bank will move slowly but surely towards normalizing monetary policy.

“Today’s move in (dollar/yen) is a combination of further lower US interest rates and hawkish comments from the Bank of Japan Governor,” said Chandresh Jain, FX, interest rates and global markets strategist for Asia-Pacific at BNP Paribas.

Earlier on Thursday, Japanese Finance Minister Shunichi Suzuki also said the government was watching currency market movements with a "great sense of urgency," after the yen fell to a four-month low of 151.82 in the previous session and toward the yen's multi-decade level. a little.

“I think there is a bit of temptation going on... given that the speed of the yen's movement may have been a little faster than what Finance Ministry officials would like to see,” said Moh Seong Sim, a currency strategist at Bank of India. Bank of Singapore.

However, the main driver remained the US dollar's decline, after the Federal Reserve maintained its interest rate cut expectations for this year in the face of bullish surprises on inflation, and did not take a more hawkish tone as some investors had feared.

At the conclusion of the Fed's policy meeting on Wednesday, Fed Chairman Jerome Powell said the recent higher inflation readings did not change the underlying trend of slowly easing price pressures in the United States. The central bank remained on track for three interest rate cuts this year, although it expected slightly slower progress on inflation.

That sent the greenback lower as traders rushed to rebuild bets on the Fed's easing cycle starting in June, with markets now anticipating a 75% chance of a rate cut that month, compared to a 59% chance the day before, according to the Chicago Mercantile Exchange. Feedwatch tool.

The euro EUR=EBS and the pound sterling GPB=D3 hit their highest levels in a week against the dollar on Thursday, rising to $1.0939 and $1.2803, respectively.

“The Fed really wants a soft bottom end,” said Seema Shah, chief global strategist at Principal Asset Management. “Stronger growth, lower unemployment, higher inflation — and yet no change in the middle point.”

“Maybe Powell has shown his cards: he needs a good reason not to cut rates, not a reason to cut rates.”

The dollar index = USD was little changed at 103.24, after falling more than 0.5% on Wednesday.

The Bank of England (BoE) will be next on investors' radar as it announces its interest rate decision later on Thursday, with expectations indicating that the central bank will keep interest rates unchanged.

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

Surprise jobs

The return of Australian employment numbers for February and the decline in the unemployment rate gave a boost to the Australian dollar AUD=D3.

Figures released by the Australian Bureau of Statistics on Thursday showed 116,500 more in February than in January, beating previous market expectations of an increase of 40,000, while the unemployment rate fell to 3.7%.

The Australian dollar jumped more than 0.6 percent to a one-week high of $0.66295.

“Employment data is always very volatile, and one month's data should not be read in isolation. However, today's numbers are too strong to ignore,” said Rob Carnell, ING's regional head of research for Asia Pacific.

“Given this data, (the Reserve Bank of Australia) may be relieved that it did not go further and adopt an explicit easing bias this week.”

The Reserve Bank of Australia, at its policy meeting earlier this week, kept interest rates steady and moderated its tendency to tighten policy.

Elsewhere, the New Zealand dollar NZD=D3 rose 0.25% to US$0.6097, although its gains were capped by data that showed New Zealand's economy contracted slightly in the fourth quarter, putting the country into a technical recession.