7 hrs ago
Dollar Nears Seven-Month Yen Low as Oil Tops $100
The dollar became weaker compared with the Japanese yen.
The yen has gained value quickly this month.
Investors think Japan’s central bank may raise interest rates soon.
Comments from the United States Treasury Secretary also encouraged traders to support the yen.
Oil prices rose above $100 a barrel as fighting in the Middle East became more intense.
Higher oil prices can affect economies and influence what central banks do with interest rates.
Investors were also waiting for United States inflation data and major central bank meetings.
Other currencies, including the euro and Australian dollar, moved only slightly.
The dollar fell 0.23% to 153.65 yen, near Tuesday’s seven-month low of 152.89.
Brent crude settled 3.36% higher at $101.21 per barrel amid escalating Middle East conflict.
The yen has gained about 4% this month as traders anticipate faster Bank of Japan policy tightening.
Markets widely expect the Bank of Japan to raise rates by 25 basis points at its September 17–18 meeting.
The dollar index was flat at 98.83, while the euro rose to $1.1628 ahead of an expected European Central Bank rate increase.
- Who
- Currency traders, the Federal Reserve, the Bank of Japan, the European Central Bank and the United States Treasury were central to the market moves.
- What
- The dollar traded near a seven-month low against the yen as oil prices rose above $100 per barrel.
- Where
- Global financial markets, with notable moves in the dollar-yen exchange rate and oil markets.
- When
- Wednesday, September 9; markets were also preparing for central bank meetings the following week.
- Why
- The yen strengthened on expectations of faster Bank of Japan tightening, possible Japanese repatriation flows and support from Washington, while Middle East conflict pushed oil prices higher.
Factors Supporting Yen Strength
Factors Supporting Dollar Resilience
Interest-rate expectations
Factors Supporting Yen Strength
Investors anticipate faster Bank of Japan policy tightening, with markets widely expecting a 25-basis-point rate increase in September.
Factors Supporting Dollar Resilience
Strong United States payrolls data revived expectations that the Federal Reserve could raise rates the following week.
Government influence
Factors Supporting Yen Strength
United States Treasury Secretary Scott Bessent urged traders not to bet against the yen, while analysts said Washington’s position had evolved.
Factors Supporting Dollar Resilience
The dollar recovered some losses after the United States Treasury announced a larger long-dated bond buyback operation.
Energy prices
Factors Supporting Yen Strength
The yen’s gains continued despite oil rising above $100 a barrel, challenging the usual support higher energy prices can provide to the dollar.
Factors Supporting Dollar Resilience
Higher oil prices could affect Federal Reserve policy expectations, particularly by increasing inflation concerns.
Key facts
- Dollar-yen rate
- The dollar fell 0.23% to 153.65 yen.
- Recent yen low
- The dollar reached 152.89 yen on Tuesday, its lowest level in seven months.
- Brent crude
- Brent rose 3.36% to settle at $101.21 per barrel, its highest level since May.
- Yen performance
- The yen has strengthened about 4% against the dollar so far this month.
- Bank of Japan meeting
- Markets widely expect a 25-basis-point rate increase at the September 17–18 meeting.
- Dollar index
- The dollar index was flat at 98.83, near its lowest level in almost two weeks.
- Euro exchange rate
- The euro rose 0.05% to $1.1628 ahead of an expected European Central Bank rate increase.
Quotes
Kevin Ford
FX and macro strategist at Convera
“The main story here is that the U.S. policy premium is putting a cap on the dollar's advance and we have the yen strengthening with the support of the U.S. Treasury”
livemint.com
“I think there's a momentary disconnect between rate expectations and oil, which provided support in terms of trade back in March for the U.S. dollar.”
livemint.com
Scotiabank analysts led by Shaun Osborne
Analysts commenting in a Scotiabank investor note
“These remarks carry significant weight because the secretary had explicitly ruled out intervening in support of the JPY in January. Thinking at the Treasury has evolved”
livemint.com
Sources
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