Anna 
On Monday, the dollar dipped slightly as a disappointing U.S. jobs report fueled speculation that the Federal Reserve might still cut interest rates this year, while the yen retreated following last week’s suspected intervention that led to volatile movements.
Yen Movement and Intervention
Last week, the yen saw its strongest weekly gain since December 2022, surging 3.5% following suspected intervention from Tokyo to prevent the currency from hitting a 34-year low of 160.245 against the dollar. On Monday, the yen slid 0.5% to 153.69 per dollar. With Japanese and British markets closed for a holiday, trading volumes are expected to be lower, but traders remain watchful after last week’s intervention.
The Bank of Japan reportedly spent more than 9 trillion yen to support the yen last week, providing temporary relief. However, analysts caution that the broader market sentiment remains negative for the yen, given the divergence in interest rates between the U.S. and Japan, which incentivizes investors to seek higher yields elsewhere.
Fed Rate Expectations and Dollar Index
The recent U.S. jobs data showed slower job growth in April and a decrease in annual wage growth, fueling expectations of a “soft landing” for the U.S. economy and raising speculation about potential rate cuts by the Federal Reserve. Market sentiment now leans towards nearly 50 basis points of rate cuts this year, with a cut in November fully priced in.
The dollar index, which measures the dollar against a basket of major currencies, was at 105.10, recovering slightly from a more than three-week low touched on Friday at 104.52. Despite the recent decline, the dollar index remains up nearly 4% for the year but fell almost 1% last week.
Euro, Sterling, and Yuan Movement
The euro was trading around $1.0764, while the British pound edged up 0.2% to $1.25715 ahead of the Bank of England’s policy announcement later in the week. The offshore yuan softened to 7.2194 per dollar after gaining over 1% last week, while the onshore yuan opened stronger at 7.2009 per dollar, its strongest level since March 25.
The broader market sentiment continues to be influenced by expectations surrounding Fed policy and global economic conditions, with traders closely monitoring central bank decisions and economic data releases for further insights into currency movements.
