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On Tuesday, the dollar exhibited strength, maintaining its position above 150 yen amidst expectations of prolonged higher US interest rates. This occurred against the backdrop of Japan’s economic recession and market skepticism regarding Tokyo’s imminent monetary easing policy adjustment.
China’s Mortgage Rate Cut Draws Trader Attention
Early Tuesday, China’s decision to lower the main reference rate for mortgages attracted traders’ focus. This move, aimed at stimulating credit demand and reviving the real estate market, resulted in the yuan dropping to its lowest level in three months. Investors signaled the necessity for increased support to bolster fragile market confidence.
USD/YEN Pair Continues Upward Trend
The dollar climbed 0.2 percent to reach 150.42 yen, extending its streak above the key 150 yen threshold for the sixth consecutive session. Japanese officials issued warnings to maintain currency stability amidst this sustained rise.
US Inflation Data Impacts Market Expectations
Last week’s higher-than-expected US producer and consumer prices reinforced market expectations regarding the Federal Reserve’s potential interest rate cuts and their magnitude this year.
Japan’s Unexpected Recession Spurs Policy Reevaluation
Japan’s unexpected economic recession in the last quarter of 2023, driven by decreased consumption and capital spending, prompted investors to reconsider the likelihood of the Bank of Japan’s imminent adjustment to its ultra-loose monetary policy.
Performance of Other Major Currencies
The euro experienced a 0.1 percent decline to $1.0768, while the British pound fell 0.13 percent to $1.25795. The yen rose marginally by 0.1 percent to 150.08 against the dollar but remains down approximately six percent for the year. The dollar index, measuring the US currency’s performance against six major currencies, rose by 0.8 percent to 104.37.
