Karen Brettell
NEW YORK (Reuters) – The dollar fell against the euro on Friday on weaker-than-expected U.S. economic data but rose against the Japanese yen after Bank of Japan (BOJ) Governor Kazuo Ueda said It is too early to declare victory over inflation.
In cryptocurrencies, Bitcoin held just below the more than two-year high it reached on Wednesday.
US manufacturing continued to fall in February, with factory employment falling to a seven-month low as new orders fell. Construction spending, which had been expected to rise, also fell in January.
Following the data, Goldman Sachs economists cut their estimate for first-quarter gross domestic product (GDP) by 0.2 percentage points to 2.2%.
The dollar is largely range-bound and traders are closely watching economic data for new clues about when the US Federal Reserve is likely to start cutting interest rates.
Mark Chandler, chief market strategist at Bannockburn Global Forex in New York, noted that “the US is a key part of this process” in terms of driving currency movements. The US dollar looked like it was going to move higher in the last few days but failed after falling on Friday, he added.
The dollar also fell lower in line with short-term Treasury yields on Friday after Fed Chairman Chris Waller said he would like the U.S. central bank to consider resetting its balance sheet toward short-term Treasury bills, which would better match short-term Treasury bills. . the term rate that the Fed controls as a key tool of monetary policy.
The next major US economic release will be the February jobs report, due next Friday.
The fall was 0.23% to 103.87. The euro added 0.31% to $1.0837.
Data on Friday showed eurozone inflation fell last month but underlying price growth remained stubbornly high, strengthening the case that the European Central Bank will keep interest rates at record highs for a little longer before starting to ease policy by middle of the year.
The eurozone currency has traded between $1.07 and $1.11 since November as investors struggle to determine when the ECB and Federal Reserve will cut rates.
“We are looking for fresh news,” said Jane Foley, head of currency strategy at Rabobank, “whether it comes from the ECB (European Central Bank) and a change in expectations or a further change in the market’s views on the Fed’s ability to cut spending even in June.” .
FOCUS ON JAPANESE INFLATION The dollar rose against the yen after Bank of Japan spokesman Ueda said it was too early to conclude inflation was close to sustainably hitting the central bank’s 2% inflation target and stressed the need to carefully examine additional data on salary prospects.
That reversed a decision made on Thursday, when Bank of Japan board member Hajime Takata said the central bank should consider overhauling its ultra-loose monetary policy, including an exit from negative interest rates and controls on bond yields.
Inflation expectations and the Bank of Japan’s policy stance are likely to depend on negotiations between large firms and unions over wage increases.
“If we are correct in expecting wage talks to lead to more signals that inflation in Japan is becoming a little more resilient, then we would expect the Bank of Japan to abandon its negative interest rate policy,” said Bipan Rai, head of North American Foreign Exchange Department. strategy at CIBC Capital in Toronto.
However, “I think the cost has already been taken into account,” Rai added. “Also, we’re really looking at what changes they’re making to the yield curve control program.”
Major firms will settle wage negotiations with unions next year on March 13, ahead of the Bank of Japan’s policy meeting on March 18-19.
The dollar was last up 0.09% at 150.10 yen.
Sterling rose 0.26% to $1.2655.
Bank of England (BoE) chief economist Hugh Pill said on Friday he believes the time for a central bank’s first interest rate cut since the coronavirus pandemic is still “a long way off”.
was last up 1.4% at $62,320 after hitting $63,933 on Wednesday, its highest since November 2021.