© Reuters. FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
By Rae Wee
SINGAPORE (Reuters) -The dollar flirted with the psychological threshold of 150 yen on Tuesday and held broadly steady ahead of a key reading on U.S. inflation due later in the day, while bitcoin surged to a more than two-year high.
Trading was largely subdued in Asia with markets in China and Hong Kong still closed for the Lunar New Year holidays and traders on guard ahead of Tuesday’s release of consumer prices data in the world’s largest economy.
The greenback rose to an over two-month high of 149.58 yen, edging toward the closely-watched 150 level that analysts said would likely trigger further jawboning from Japanese officials in an attempt to support the currency.
The yen, which has already tumbled more than 5% against the dollar year-to-date, is under persistent pressure as investors pare back their expectations of the scale and pace of the Federal Reserve’s easing cycle.
Yen bears are also being emboldened by signs the Bank of Japan will resist aggressively hiking rates even if it exits negative interest rates this year as markets are wagering.
“It is a bit of a yield story. Yields in the U.S. are around their highs for 2024, so that’s certainly helped dollar/yen,” said Tony Sycamore, a market analyst at IG.
“It’s also being supported by carry. With volatility so low and… for 2024, the markets have been pretty happy to add risk to their portfolios, and the carry trade is certainly part of that, which supports dollar/yen because of the yield differential.”
Elsewhere, the New Zealand dollar fell 0.38% to $0.6105, after a Reserve Bank of New Zealand survey showed on Tuesday the country’s inflation expectations fell to more than two-year lows in the first quarter.
The euro edged 0.04% lower to $1.0767, while sterling fell 0.1% to $1.26165.
A recent run of resilient economic data out in the United States, particularly a blowout jobs report out this month, have heightened expectations that U.S. rates are likely to stay higher for longer.
Markets are now pricing in just about 110 basis points of rate cuts from the Fed this year beginning in May, down from about 160 bps at the end of last year.
The Federal Reserve Bank of New York said in its January Survey of Consumer Expectations on Monday that inflation forecasts for a year and five years from now were unchanged at readings…