Chinese banks’ dollar purchases via FX swaps from their clients hit $64.5 billion in March, the highest level on record, official data from the foreign exchange regulator showed on Friday. The data shows exporters are increasingly turning to the swap market to convert overseas earnings and remittances into yuan, rather than outright dollar selling, as they seek higher returns on dollars and wait for better exchange rates. Such a swap implies exporters give the banks their dollars and receive yuan through a contract that reverses the transaction at maturity. Meanwhile, ...

USD: Expecting a delayed strengthening The dollar should be trading higher after yesterday’s US GDP report. The very short-lived USD jump against major currencies denotes how the FX market still has some tendency to give greater weight to negative news on US data compared to USD-positive news. But a lagged re-linking with higher rates and lower equities looks likely. As discussed by our US economist here, the slowdown in US 1Q growth was quite substantial: in one quarter, the annualised growth rate was more than halved from 3.4% to 1.6% ...

Markets are on high alert Now that USD/JPY has glided through the 155 level, markets are now on high alert for Japanese FX intervention. Recall that 155 had been the level that many in the Japanese banking community had felt would elicit BoJ FX selling operations. That heightened sense of intervention is reflected in the FX options market, where one week USD/JPY traded volatility is now priced at 14.5%, the highest since last December and the one week risk reversal skew – the price for a USD/JPY put over an ...

Financial analysts at Citi indicated a potential halt in the recent rally of the US dollar, citing a series of economic indicators that may temper its strength. The broker pointed to the latest manufacturing data and commodity support as key global factors but also noted a seasonal trend of diminishing positive data surprises as the second quarter approaches. Yesterday’s Purchasing Managers’ Index (PMI) figures fell short of expectations, leading Citi’s economic surprise index to drop to its lowest point in several months. This development serves as a reminder that the ...

Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as traders drive down the currency on expectations that any further interest rate hikes by the central bank will be slow in forthcoming. Below are details on how yen-buying intervention works: LAST CONFIRMED YEN-BUYING INTERVENTION? Japan bought yen in September 2022, its first foray in the market to boost its currency since 1998, after a Bank of Japan (BOJ) decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar. It ...

The U.S. dollar gained on Thursday after a hotter-than-expected inflation reading for the first quarter, affirming expectations that the start of the Federal Reserve’s easing cycle could be pushed later in the year. The yen, meanwhile, hit a fresh 34-year low versus the dollar and a 16-year low against the euro on Thursday as investors expect a Bank of Japan policy meeting that ends on Friday to not be hawkish enough to support the Japanese currency. The focus, however, has been on the U.S. gross domestic product data and the ...

As the yen plumbs three-decade lows and pressure grows on Japan to intervene or make monetary policy changes, traders figure there is not much Tokyo can do to reverse the currency’s slide while interest rates and momentum are heavily skewed against it. The Bank of Japan (BOJ) sets policy on Friday with almost no expectation of a rate rise. It has no currency mandate but a weakened yen, which is at a 34-year trough on the dollar and record low levels in real terms, affects inflation because it raises import ...

There will be quite a lot of attention on today’s first quarter US core GDP price deflator and what it means for tomorrow’s release of the March core PCE figure. Analysts will be looking at the second decimal point on today’s release to infer whether tomorrow’s number is on consensus at 0.3%, 0.4% or 0.2% MoM. The outcome will have implications for the dollar. USD: Reading through the first quarter data tea leaves There has been much speculation this week over the outcome of tomorrow’s release of the US March ...

The yen hit fresh 34-year low versus the dollar and a 16-year low against the euro on Thursday as investors expect a Bank of Japan policy meeting that ends on Friday not be hawkish enough to support the Japanese currency. A day earlier, the buoyant dollar broke above the 155 yen level for the first time since 1990 after having traded in a tight range over several days. On Thursday, the greenback rose to a 34-year high of 155.74 yen and was last 0.2% higher at 155.62. The euro hit ...

Japan’s ruling party is not yet in active discussion on what yen levels would be deemed worth intervening in the market, though the currency’s slide towards 160 to the dollar could prod policymakers to act, party executive, Takao Ochi, told Reuters. “There is no broad consensus right now, but if the yen slides further toward 160 or 170 to the dollar, that may be deemed excessive and could prompt policymakers to consider some action,” Ochi said in an interview on Tuesday. Right now, however, there has been little active discussion ...

The yen dropped against the U.S. dollar on Wednesday to its weakest since mid-1990, with markets alert to any signs of intervention from Japanese authorities to prop up their currency. As the yen slid, the greenback edged higher, recovering against most currencies from falls caused by Tuesday’s data showing U.S. business activity slowed this month. The dollar rose as high as 155.17 yen, its strongest since mid-1990, before falling back in choppy trading, a sign of market nervousness around the 155 level. It was last at 155.08, up roughly 0.2% ...

The yen dropped to multi-year lows against the U.S. dollar and euro on Tuesday, keeping investors on heightened intervention watch ahead of this week’s Bank of Japan meeting, while dovish policy maker comments left sterling near its weakest in months. The euro reached 165.71 yen, its highest since 2008, after data showed business activity in the euro zone expanded at its fastest pace in nearly a year, primarily due to a recovery in services. Europe’s common currency was last up 0.4% at 165.59 yen. The dollar rose to 154.88 yen ...

One by one, scenarios of a dollar demise are getting batted away yet again. A source of currency market hand-wringing for decades, tales of the dollar’s decline as the dominant world currency are nothing new. And they mostly founder on the lack of a serious credible alternative or the resilience of the U.S. economy and the openness, sheer scale and liquidity of its asset markets. While the exchange rate of the greenback ebbs and flows with relative interest rate cycles – and it’s surging again this year as the Federal ...

USD: Going steady The dollar has returned to consolidation mode after last week’s run on the upside. Friday’s March core PCE deflator release remains the biggest number of the week and will determine whether US short-dated yields need to rise any further. Indeed, many investors might find US two-year Treasury yields very attractive at 5% given the dangerous geopolitical backdrop. For today, we doubt the US April PMIs or new home sales data will have much impact on the dollar. And, at the margin, it may be the threat of ...

The yen hit fresh multi-year lows against the dollar and the euro on Tuesday, keeping investors on heightened intervention watch ahead of the Bank of Japan’s meeting this week, while dovish policy maker chatter left sterling around its softest in months. The euro, which climbed broadly after stronger than expected business activity data in France and Germany, reached 165.62 yen, its highest since 2008. “That’s a combination of the stronger euro today, with the services data moving back into expansionary territory, an encouraging sign that the headwinds to growth for ...