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Spread of US inflation expectations leads to a stronger dollar
The USDJPY continued to trade around the 134 yen.
“Spread of US inflation expectations leads to a stronger dollar”
In the foreign exchange market, the USDJPY rose to around 135.70 yen, ending the week at a high level. The USDJPY, which continued to trade around the 134 yen level in the latter half of the London market, made an attempt at the 135 yen level during the NY morning session but failed to gain momentum and remained around 134.80 yen before the release of the University of Michigan’s consumer sentiment survey. The survey showed that the expected inflation rate one year and five to ten years from now exceeded market expectations, resulting in a strengthening of the US dollar. In particular, the inflation expectation for five to ten years from now reached its highest level since March 2011, leaving a strong impression of rising inflation expectations.
Immediately after the release of the survey, the USDJPY briefly rose to the 135 yen level. However, due to the fact that the actual consumer sentiment index number was weaker than expected, profit taking selling pushed the exchange rate below the pre announcement level. Nevertheless, the dollar strengthened again, along with the rise in US bond yields, and pushed the exchange rate up to around 135.70 yen. In the afternoon, the exchange rate remained in the high dollar, low yen range, with a slight pullback to around 135.60 yen.
The USD also gained strength against the euro. After reaching around 1.0930 in the London market, the euro fell sharply to around 1.0880 as euro selling intensified just before the University of Michigan’s consumer sentiment survey was released. The exchange rate then fell further to below 1.0850 due to the strengthening of the US dollar. The euro ended the week at a low level as well.
The EURJPY was weak due to euro selling against the dollar, falling from around 147.50 yen to around 146.60 yen in the London market before rising to around 147.30 yen, supported by the rise in the USDJPY.
The pound initially saw euro selling and pound buying against the euro in the London market but later fell due to pound selling. Against the dollar, the pound was weak, falling to below 1.2450 after reaching around 1.2540 in the London market.
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