The yen posted its biggest daily drop against the dollar in almost five months on Monday, even as the dollar index held near a two-month low. Traders pared bets on a September Fed rate hike after Friday's soft U.S. jobs report, with Wednesday's CPI print now in focus.
The yen weakened 0.6% to a low of 158.89 per dollar on Monday, its biggest daily drop against the U.S. currency in almost five months. The move came even as the dollar index, which tracks the currency against six major peers, stayed little changed at 99.70, after hitting its lowest level since June 15 on Friday.
Jobs Data Cools Rate Hike Bets
Friday's data showed the U.S. economy unexpectedly shed jobs in July, while job gains for the prior two months were revised sharply lower. The soft labour market reading added weight to Wednesday's CPI report, with investors looking for clues on the Fed's policy path.
According to Reuters, ING FX strategist Francesco Pesole said: "It (the labour market data) was a negative event for the dollar," adding that a hot CPI print could still bring rate hike bets back into markets' baseline. As a result, the futures market scaled back the chance of a September move to around 48% from 67% a week ago. A consensus estimate calls for core CPI to rise 0.2% month-on-month in July, with the annual rate seen moderating to 2.5% from 2.6% in June.
Speculators Slash Bearish Yen Bets
Yet positioning data told a different story for the yen. Speculators slashed their bearish bets on the currency by the most in over 12 years, according to Commodity Futures Trading Commission data released Friday, reflecting the coordinated effort by Japanese and U.S. authorities to strengthen the currency.
The net short position in the yen fell by $8.865 billion to $3.604 billion in the week to August 4, the largest drop in absolute terms since March 2014. Meanwhile, speculators increased their net long position in the dollar to the highest level since December 2022.
Source: Reuters
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