The dollar was sold and the yen bought in New York foreign exchange trading on the 28th, pressured by deteriorating key economic indicators and receding geopolitical risks. The dollar-yen pair touched a session high of 163.94 yen before sliding to 163.65 yen, closing near that level.
Capturing the market’s attention was the U.S. July consumer confidence index, which came in at 90.8, missing the consensus estimate of 92.0 and worsening from the prior month’s 92.2 reading. The unexpected result pushed long-term U.S. interest rates lower, serving as the primary catalyst for dollar selling. Additionally, the halt in tit-for-tat strikes between the U.S. and Iran, along with the prospect of continued peace negotiations, eroded demand for the dollar as a safe-haven asset. Combined with a continued slide in crude oil prices, risk appetite strengthened.
The euro-dollar pair dipped to $1.1360 at one point but later climbed to $1.1405 by the close. The euro-yen cross also showed firmness, rising from 186.20 yen to 186.68 yen. Sterling advanced against the dollar, moving from $1.3280 to $1.3311, while the dollar weakened against the Swiss franc, falling from 0.8204 francs to 0.8168 francs.
A wait-and-see mood prevailed during early trading. As of 8:40 a.m. on the 28th, the dollar-yen pair was trading at 163.84-94 yen, down 0.14 yen from the previous day. On the 27th, reports of a pause in U.S.-Iran hostilities had triggered selling of the safe-haven dollar and buying of the yen, with the pair quoted at 163.70-80 yen as of 5 p.m. Many investors were avoiding aggressive position-taking with the Bank of Japan and Federal Reserve policy meetings looming.
A slew of economic indicators released during the day presented a mixed picture.
| Indicator | Actual | Estimate | Prior |
|---|---|---|---|
| U.S. July Consumer Confidence Index | 90.8 | 92.0 | 92.2 |
| U.S. June Advance Goods Trade Balance | −$101.5 billion | −$100.0 billion | −$105.9 billion |
| U.S. June Wholesale Inventories (MoM, advance) | +0.3% | +0.4% | +0.3% |
| U.S. May FHFA House Price Index (MoM) | +0.3% | +0.1% | −0.1% |
| U.S. May S&P CoreLogic Case-Shiller 20-City Home Price Index (YoY) | +1.63% | +1.30% | +1.18% |
| U.S. July Richmond Fed Manufacturing Index | 5 | 6 | 4 |
| U.S. July Dallas Fed Services Activity | 6.6 | 3.8 | 2.9 |
The trade deficit stood at $101.5 billion (approximately ¥16.6 trillion), wider than the $100.0 billion forecast, though narrowing from the prior month’s $105.9 billion. It remains at an elevated level. In the housing market, the FHFA house price index rose 0.3% month-over-month, topping the 0.1% estimate and demonstrating resilience. The S&P CoreLogic Case-Shiller 20-city home price index also exceeded expectations, climbing 1.63% year-over-year.
On the manufacturing front, the Richmond Fed manufacturing index came in at 5, below the 6 estimate but an improvement from the prior month’s 4. The Dallas Fed services activity index surged to 6.6, significantly outpacing the 3.8 forecast and highlighting strength in the services sector. Meanwhile, the four-week moving average for the ADP employment report showed an increase of 15,000 jobs, decelerating from the prior reading of 16,250.
Amid the prevailing dollar-selling trend, the decline in long-term yields paused following a poorly received U.S. 7-year note auction. This, in turn, took some steam out of the dollar’s downward momentum. Market participants are increasingly of the view that the deterioration in consumer confidence could signal a slowdown in personal consumption ahead.
The currency market is expected to remain jittery as it awaits the outcomes of monetary policy meetings at the U.S. Federal Reserve and the Bank of Japan. In particular, whether the BOJ will proceed with an additional rate hike remains the biggest focal point for determining the yen’s direction.
finance.biggo.com