FOREX-Dollar steady as inflation data boosts June rate cut bets; yen in focus

The dollar was broadly steady on Monday as data showing easing U.S. prices bolstered bets that the Federal Reserve could cut interest rates in June, while the yen loitered near 152 per dollar keeping traders on edge on the threat of intervention.

The dollar was broadly steady on Monday as data showing easing U.S. prices bolstered bets that the Federal Reserve could cut interest rates in June, while the yen loitered near 152 per dollar keeping traders on edge on the threat of intervention. The personal consumption expenditures (PCE) price index rose 0.3% in February, the Commerce Department's Bureau of Economic Analysis said on Friday, compared with the 0.4% rise that economists polled by Reuters had forecast.

The report also showed consumer spending rising by the most in just over a year last month, underscoring the economy's resilience. Most markets across the globe were closed on Friday, with European markets closed on Monday as well. Federal Reserve Chair Jerome Powell on Friday said the latest U.S. inflation data was "along the lines of what we would like to see," in comments that tallied with his remarks after the Fed's policy meeting last month.

"The Fed's willingness to tolerate inflation well above 2% while still considering rate cuts is supporting risk assets," said Mansoor Mohi-uddin, chief economist at the Bank of Singapore. Markets are now pricing in 68.5% chance of the Fed cutting rates in June versus 57% chance at the end of last week, the CME FedWatch tool showed. Traders are also pricing in 75 basis points of cuts this year.

Citi strategists said the Fed remains on track to begin cutting rates in June. "If activity holds up, the Fed might deliver three rate cuts this year. But a further softening in labour markets has us expecting five rate cuts this year." Investor attention will switch to March's employment data due later, with a soft jobs report boosting further the chances of the Fed starting its easing cycle from June.

The euro was 0.03% lower at $1.0787, hovering near its more-than-one-month low of $1.0769 touched last week. Sterling was last at $1.2637, up 0.12% on the day. The dollar index, which measures the U.S. currency against six rivals, was 0.057% higher at 104.54, close to the six-week high of 104.73 it touched last week.

The spotlight in the currency market has been on the yen as its move toward levels last seen in 1990 revives the threat of intervention by Japanese authorities. The yen touched a 34-year low against the dollar of 151.975 on Wednesday and was last at 151.395 per dollar on Monday.

Japan intervened in the currency market in 2022, first in September and again in October, as the yen slid toward a 32-year low of 152 to the dollar. Japan's plans for the yen remain difficult to predict. Its fiscal year has ended, meaning the Bank of Japan does not need to worry about sudden yen movement impacting balance sheets.

But news of last week's emergency meeting of the three monetary authorities - the Ministry of Finance (MOF), BOJ and Financial Services Agency - and jawboning from officials seem to have worked to bring the yen back from 34-year lows. Finance Minister Shunichi Suzuki said on Monday he would not rule out options against excessive currency movement and would respond appropriately, reiterating his warning on rapid yen moves.

Latest weekly data from the U.S. markets regulator showed speculators hold a net short yen position worth $10.64 billion, ramping their bets back to the two-year high of $11 billion they held at the beginning of March. China's yuan weakened on Monday, pressured by the dollar, even as the latest Chinese data signalled the economy's recovery is gaining traction and the central bank's sustained efforts to stabilise the currency.

In the spot market, the yuan opened at 7.2227 per dollar and was last changing hands at 7.2292. The offshore yuan was trading at 7.2508 per dollar. In other currencies, the Australian dollar was 0.08% higher at $0.6521, while the New Zealand dollar was little changed at $0.59805.

In cryptocurrencies, bitcoin last rose 1% to $70,425.88. Ether was 3% higher at $3,600.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)