The dollar fell against the yen with US yields pressured after the CPI

TOKYO ( – The dollar slumped for a second straight day against the yen in early Asia on Thursday morning, feeling pressure from lower US government bond yields after slowing inflation made traders more confident that the Federal Reserve will raise interest rates.

The yield on the 10-year US Treasury, which the dollar-yen pair tends to track, slipped to 3.4252 percent in Tokyo trading, extending an 8 basis point decline from overnight, after the headline CPI printed below 5.0 percent for the first time in two years.

The US currency fell 0.26 percent to trade at 134.025 yen in the Asian morning, and earlier slumped to 133.895.

Dollar index – that measures greenbacks against a basket of six other major currencies, including the yen – edged down 0.05 percent to 101.36.

“Yesterday’s CPI was a bit of a relief, and we expect the Fed to now finish climbing,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo.

“That will weigh on the dollar-yen,” with the pair potentially weakening to as low as 130 in the near term, said Kadota.

Money market traders currently have only a five percent chance of a quarter-point gain in June, and a 95 percent chance of a break. A three-quarter point cut is expected by the end of this year.

Japan’s central bank (BoJ) policymakers, meanwhile, see the country making progress toward achieving their inflation target on a sustainable basis, according to the minutes from their April meeting.

But they also agreed on the need to maintain very loose stimulus arrangements amid uncertainty about the sustainability of wage growth as well as the outlook for the global economy.

“They’re still trying to balance the overall tone,” said Kadota.

The euro inched 0.05 percent higher to $1.09885, moving back in the middle of its trading range over the past month.

Sterling rose 0.04 percent to $1.2631, edging back to a one-year high Wednesday (10/5/2023) at $1.2679. The Bank of England will release its policy decision on Thursday, and is gearing up for a 12th straight rate hike.

Elsewhere, the Australian dollar rose 0.08 percent to $0.6784, pushing back to a 2.5-month high Wednesday (10/5/2023) at $0.6818.

The New Zealand kiwi dollar added 0.09 percent to $0.63735, after touching a nearly three-month high of $0.6384.

Gains earlier cooled after data from China – a major trading partner – showed consumer prices rising at a slower pace, providing further evidence of weak domestic demand.

Leading cryptocurrency bitcoin was little changed at around $27,562, after dropping as low as $26,842 overnight for the first time since March.

Also read: Wall Street closes mixed amid signs of slowing inflation
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Also read: Gold slipped due to profit taking after US inflation data

Translator: Apep Suhendar
Editor: Biqwanto Situmorang


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