By Amanda Cooper
LONDON, Feb 9 (Reuters) – The dollar headed for a fourth weekly gain on Friday, pushing the yen to a 10-week low, as traders dialled back bets on how quickly the Bank of Japan might raise interest rates and how soon the Federal Reserve will cut them.
BOJ Governor Kazuo Ueda said on Friday there was a high chance for easy monetary conditions to persist even after the central bank ends negative interest rate policy, which the market expects to happen as early as next month.
That echoed dovish comments from his deputy, Shinichi Uchida, a day earlier that “it’s hard to imagine” that rates would rise “rapidly.”
In contrast, a raft of U.S. Federal Reserve officials this week have signalled the central bank has no pressing need to cut interest rates, thereby giving the dollar an extra tailwind.
“A word of caution is coming through that rates will stay higher for longer and early rate cuts are unfounded. That is giving the dollar extra strength … (and) is what is propelling the yen weaker again,” Hargreaves Lansdown head of money and markets Susannah Streeter said.
The yen was little changed at 149.42 per dollar JPY=EBS after trading at 149.575 earlier, its weakest since Nov. 27. It is heading for a 0.68% slide this week, having fallen in value in five out of the last six weeks.
On Friday morning in Tokyo, Japanese Finance Minister Shunichi Suzuki said that he was “watching FX moves carefully,” uttering the well-worn phrase for the first time since Jan. 19. Traders were unfazed by the warning.
The dollar index =USD ticked up slightly to 104.19, for the week it has climbed 0.2%, getting off to a strong start after blowout monthly payrolls data last Friday and a hawkish tilt from Fed Chair Jerome Powell in a “60 Minutes” interview aired Sunday.
The next major scheduled U.S. data release is January’s Consumer Price Index (CPI) inflation reading on Tuesday, though traders are also waiting for Friday’s annual update of seasonal adjustment factors for consumer price inflation.
“Last year’s update of CPI seasonal adjustment factors was a big deal, showing inflation momentum was stronger than thought at the end of 2022, catching both the market and the Federal Reserve off guard,” said James Knightley, ING’s chief international economist in a note.
Traders have all but ruled out a cut at the Fed’s next policy meeting in March, versus a chance of 65.9% a month ago, according to CME Group’s FedWatch Tool. It shows around a 60% chance of a cut by the Fed’s May meeting.
The euro EUR=EBS was little changed at $1.0773, while sterling GBP=D3 held at $1.260. Both currencies have been relatively resilient this week, with officials from the European Central Bank and Bank of England pushing back against market wagers on early rate reductions.
The Swiss franc weakened to 0.8762, with the dollar up nearly 1% on the safe haven currency this week, as traders digested data suggesting the Swiss National Bank could be intervening in markets to weaken the unit.
Leading cryptocurrency bitcoin BTC=BTSP rose 3% to around $46,688, on course for a weekly gain of 9.3%, its best performance in two months.
World FX rates https://tmsnrt.rs/2RBWI5E
(Additional reporting by Kevin Buckland in Tokyo and Alun John in London Editing by Shri Navaratnam, Lincoln Feast and Ros Russell)
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