The dollar index advanced to 105.1 on Tuesday, its highest since November 14, adding to sharp gains on Monday after U.S. data unexpectedly showed the first expansion in manufacturing since September 2022
The U.S. dollar was lower on Tuesday after earlier reaching its highest in around five months, following a new report that showed U.S. job openings held steady at higher levels in February.
The Japanese yen was up at 151.605 per dollar, after earlier dropping to 151.79. It has traded in a tight range since hitting a 34-year low of 151.975 on Wednesday, which spurred Japan to step up warnings of intervention.
The dollar index advanced to 105.1 on Tuesday, its highest since November 14, adding to sharp gains on Monday after U.S. data unexpectedly showed the first expansion in manufacturing since September 2022, causing traders to lower rate bets.
The dollar index sat at 104.81, down 0.181% after a report from the Labor Department showed that job openings rose to 8.756 million on the last day of February, marginally higher than expectations, as traders also digested a February rise in factor orders.
The Commerce Department’s Census Bureau on Tuesday said new orders for U.S.-manufactured goods bounced back more than expected in February, bolstered by demand for machinery and commercial aircraft as manufacturing regains its footing.
Monday’s U.S. ISM manufacturing survey data featured a sharp increase in a measure of prices in the sector, adding to investors’ worries that inflation will be slow to drop to 2%, delaying the Fed’s first rate cut.
Really the dollar over the last nine months or so has been driven by Fed policy expectations – when the possibility of a cut increases sooner, the dollar tends to weaken, and vice versa, according to John Velis, Americas macro strategist at BNY Mellon.
On Tuesday, Japanese Finance Minister Shunichi Suzuki reiterated that he would not rule out any options to respond to disorderly currency moves.
Japanese authorities intervened in 2022 when the yen slipped toward a 32-year trough of 152 to the dollar.
The yen’s drop has come despite the BoJ’s first interest rate hike since 2007 last month, with officials cautious about further tightening amid a fragile exit from decades of deflation.
The fact that they did not intervene last week to me indicates that it is going to take a break above 152 for Japanese policymakers to start getting involved, and in retrospect, I think maybe that is prudent of them because intervention loses its significance each time you enter the market, according to Matt Weller, head of market research at StoneX.
Still, officials are “wary of backing themselves into a corner by drawing a line in the sand at 152,” according to Nicholas Chia, Asia macro strategist at Standard Chartered.
Chia added: The rationale of jawboning and intervening in forex markets is mainly to buy time for the JPY in the hopes that USD strength fades and recedes.
