Daily Digest Market Movers: Japanese Yen bears turn cautious amid intervention warning from Japanese authorities
- The US Dollar surged across the board in reaction to the third straight month of strong US consumer price readings, dragging the Japanese Yen to its lowest level since mid-1990 on Wednesday.
- The US Bureau of Labor Statistics (BLS) reported that the headline Consumer Price Index (CPI) rose by the 3.5% YoY rate in March compared to the 3.4% anticipated and 3.2% in the previous month.
- Meanwhile, the annual core CPI, which excludes volatile food and energy prices, held steady at 3.8%, while on a monthly basis, the CPI and the core CPI both rose 0.4% as against the 0.3% estimated.
- This follows last week's upbeat US jobs data for March and fueled speculations that the Federal Reserve would delay cutting rates, triggering a surge in the US Treasury yields and the US Dollar.
- The FOMC meeting minutes showed concerns over stalling inflation progress, pushing the yield on the two-year and the 10-year US government bonds to their highest level since last November.
- Japanese government officials continued with their jawboning to defend the domestic currency, which, in turn, provides some respite to the Japanese Yen and exerts pressure on the USD/JPY pair.
- Japan's top currency diplomat, Masato Kanda, reiterated that he won't rule out any steps to respond to disorderly FX moves and that he is prepared to take necessary actions whenever possible.
- Finance Minister Shunichi Suzuki also offered some verbal intervention, saying that excessive FX moves are undesirable and that he is in constant discussion with Vice Finance Minister Kanda on FX.
- The Bank of Japan struck a dovish tone at the end of the March meeting and stopped short of offering any guidance about future steps, which should keep a lid on any further gains for the JPY.
- Thursday's US economic docket features the release of the usual Weekly Initial Jobless Claims and the Producer Price Index (PPI) for March, followed by speeches by influential FOMC members.
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