(Bloomberg) -- A Bloomberg gauge of the dollar extended gains in month-end trading after a hotter-than-expected reading of employment costs drove Treasury yields higher. The yen weakened beyond the 157 per-dollar level.
- Bloomberg Dollar Spot Index rallies 0.4% after data early in US session
- US employment cost index came in at 1.2% in Q1 versus 1.0% estimated
- Yield on benchmark two-year Treasuries rose to session high 5.03%, tempered by soft consumer confidence release
- Systematic demand seen for the greenback as some rebalancing models indicate strong month-end buying, traders in Europe say
- Traders eyeing the conclusion of Fed’s two-day meeting Wednesday, where Chair Powell is expected to signal a hawkish pivot, according to Bloomberg Economics
- Yen weakens as much as 0.8% to USD/JPY 157.58
- Japan’s top currency official Masato Kanda on Tuesday didn’t say whether the Ministry of Finance had stepped into the market
- “There’s substantial risk that tomorrow brings a renewed bout of weakness for JPY if Powell does in fact lean more hawkish,” said Helen Given, a foreign-exchange trader at Monex. “That said, there would then be a macro reason for such JPY weakness, so I don’t see the BOJ acting on it”
- Hedge funds seen adding dollar-yen longs in the spot market and hedging a drop below 155 through options, returning to their strategy practices before 160 was breached, two Europe-based traders say; topside Reverse Knock-Outs into the June’s Fed meeting are also in play
- Read more: BOJ Accounts Suggest Japan Intervened Monday to Support Yen
- Loonie tumbles 0.7% to USD/CAD 1.3755 after reading of Canada GDP comes in below estimates
- Canadian economy grew 0.2% month-over-month in February, below 0.3% forecast
- Read more: Canada GDP Likely Grew 2.5% in First Quarter, Below Forecast
- EUR/USD slips 0.3% to 1.0686; earlier, the euro met support from data showing all four of the euro zone’s largest economies performed better than anticipated in the first quarter
- Put spreads in demand as traders position for Fed decision and US data: traders
- Antipodean currencies lead losses in G-10; AUD/USD down 1.2% to 0.6488 after rallying the last six sessions
- Retail sales fell 0.4% m/m in March compared with an estimate for an 0.2% gain
- Some information comes from FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly
Reporting by Carter Johnson and Vassilis Karamanis With assistance from Masaki Kondo, Matthew Burgess and Anya Andrianova
