Hawkish comments from San Francisco Federal Reserve President John Williams and St. Louis Fed President James Bullard on Monday initially drove the dollar’s gains against the euro by reinforcing expectations for a potential US interest rate increase in June or July. US -bound vehicle exports fell 4.4 percent, down for the first time since November 2014.
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According to the data on Monday, the Japanese trade balance in April was 823.5 billion yen, beating market forecasts of 492.8 billion yen.
Helping to explain the continued run of trade surpluses, the value of Japanese exports fell by a far smaller margin over the past year, declining only 10.1%.
The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index showed Japanese manufacturing activity contracted at the fastest pace in more than three years in May as new orders slumped.
The rift was on full show at the meeting in Sendai, northeast Japan, with US Treasury Secretary Jack Lew saying he did not consider current yen moves as “disorderly” after a bilateral meeting with his Japanese counterpart.
“Japan Inc. has reported its earnings and with no other catalysts on the horizon investors are going to remain very focused on what central banks are doing”. The commodity hovered around the lowest level in three weeks of 1242.53 on expectations that the Fed will raise its interest rates as early as June. Analysts say the odds of such a hike shot up seven-fold to 28 percent over the last five trading days.
Fed Chair Janet Yellen will appear at a panel event hosted by Harvard University on Friday, a day on which investors will also see the second estimate of USA first-quarter growth. Fed branch presidents including those from San Francisco, St Louis, Dallas, Minneapolis are also slated to speak earlier in the week. “And with the market again trying to price in the possibility of a Fed hike in June or July, monetary policy divergence is likely to become a temporary theme”, wrote Shusuke Yamada, chief FX strategist at Bank of America Merrill Lynch in Tokyo.
On the USA data front, home resales rose more than expected in April, suggesting the economy continues to gather pace during the second quarter.
The euro was slightly lower at $1.1222, not far above its Thursday low of $1.1180, its weakest since March 29.
Notably, the yen has appreciated by as much as 9% against the dollar this year, which has made Japanese goods less attractive to overseas buyers.
In the currency market, the US dollar traded in the lower 109 yen-level on Tuesday, down from Monday’s close in the mid 109 yen level in Tokyo.
THE United States on Saturday issued a fresh warning to Japan against intervening in currency markets as the two countries’ differences over foreign exchange overshadowed a Group of 7 finance leaders’ gathering in the Asian nation.
Crude oil futures dropped as investors locked in profits after they logged a second week of gains, despite posting losses for the day on Friday.
In early deals, USA benchmark West Texas Intermediate for July delivery was down 14 cents at $47.94 a barrel while Brent crude for July slipped 19 cents to $48.16. Home appliance and electronics exporter Panasonic Corp fell 1.8 percent while tyre exporter Bridgestone Corp was 1.3 percent lower in late morning trade.
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Gold skidded 1.7% last week, marking its biggest weekly decline in two months.
