US Economic Data Impact on Dollar and Yen Carry Trades
The dollar was in limbo on Tuesday as investors awaited US economic data to determine the possibility of rate cuts, while a rally in Japanese stocks helped stabilize yen carry trades. The greenback rose 0.33% to 147.72 yen, reaching a one-week high of 148.23 overnight before profit-taking emerged. Japan’s parliament plans to hold a special session on Aug. 23 to discuss the central bank’s decision to raise interest rates last month. The euro stood at $1.0938, creeping higher overnight. Sterling bought $1.2778, while the was flat at 103.13. Producer price figures due later will provide insight into inflation, with forecasts of a 0.2% rise in both the headline and core measures. The upcoming consumer price report and retail sales for July could impact the Fed’s decision to ease by 25 or 50 basis points in September. The futures market sees recession as a risk, with 101 basis points of Fed easing priced in by Christmas. The influential Atlanta Fed GDPNow estimate of growth is running at an annual 2.9%. Inflation rates are expected at 3.0% y/y for July, too high for the market to justify 100bp of rate cuts by year-end. In other currencies, the dollar rose 0.17% to $0.6597, while the New Zealand dollar firmed 0.3% to $0.6036.
Data on Tuesday showed Australian wages rose at their slowest pace in a year in the June quarter, falling short of expectations, suggesting the labor market was easing.