USA Dollar

Fundamental and technical reasons point to further US dollar strength

The fact that the US economy added 303K jobs in March 2024, the most in ten months, coupled with Consumer Price Inflations (CPI) coming in slightly higher-than-expected at 3.5% versus a 3.2% year-on-year increase in February, pushed US yields to five-month highs and led to the greenback appreciating.

Meanwhile US Federal Reserve (Fed) rate cut expectations have been pushed back from June and three rate cuts this year to September and two rate cuts, also boosting the greenback. This is because higher rates for longer make holding the US dollar more attractive than other currencies such as the euro of the British pound, for example, with the former expected to cut rates in June and the latter in August.

The missile and drone attacks by Iran on Israel over the weekend have led to flight-to-safety flows into the US dollar, leading to further appreciation of the currency.

The yen, despite investors expecting to see another rate hike at the Bank of Japan’s (BoJ) July monetary meeting, continues to take the brunt and is further depreciating versus the US dollar, hitting yet another 34-year high whilst on its way to its 1990 peak at ¥160.16.

USD/JPY Yearly Candlestick Chart

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