Dollar steady, yen fragile after Fed comments dash rate cut bets

FILE PHOTO: Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/File PhotoSINGAPORE : The dollar was broadly steady on Wednesday, keeping the yen rooted near 34-year lows after comments from Federal Reserve officials, including Chair Jerome Powell, suggested U.S. interest rates are likely to stay higher for longer.

"Right now, given the strength of the labour market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," Powell said at a forum in Washington. Traders now anticipate 41 basis points of cuts in 2024, drastically lower than the 160 bps of easing they priced for at the start of the year.

The revival of the higher-for-longer narrative for U.S. rates has helped push yields higher, with the benchmark 10-year Treasury yields climbing to a five-month high of 4.696 per cent on Tuesday. In Asian hours, the yield on 10-year Treasury notes was last at 4.672 per cent. "I think dollar/yen will look above the 155 level fairly soon," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

InTouch Capital's Williams said it would likely take significantly more than $60 billion under current conditions to have a lasting effect with U.S. two-year yields up around 36 bps since the start of April.

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