Dollar Was Near a Two-Month High Against the Japanese Yen

The U.S. dollar held near a two-month high against the yen on May 31, after an important measure of U.S. inflation showed stronger price gains than expected. That factor helped to boost expectations of an eventual tapering in the Federal Reserve’s asset buying. 

The U.S. inflation data released on May 28, also briefly drove the dollar higher against other currencies that day. But the world’s reserve currency ran out of steam ahead of a long weekend in New York as well as London. 

A strong economic recovery helped the Chinese yuan, it extended a recent rally to three-year highs even as Chinese authorities appeared to cut its rise. 

While trade in G10 currencies was relatively calm due to a U.K. and U.S. market holiday on May 31, the Chinese yuan maintained its bullishness even as China appears to step up its efforts to reduce the currency’s strength. Authorities in China could step up efforts to prevent the country’s currency from rising above its 2018 highs. 

The offshore yuan ticked up to 6.3550 per dollar while the onshore reached 6.3609 per U.S. unit. 

The greenback ticked down 0.2% to 109.64 yen in a trade dominated by month-end dollar selling from Japanese exporters. But, the greenback stood not far from Friday’s peak of 110.20, which was its highest since early April.

The euro was little changed at $1.2203, off Friday’s low of $1.2133. The pound barely moved at $1.4199. 

Dollar, Federal Reserve, and consumer prices

In April, U.S. consumer prices jumped, with a measure of underlying inflation blowing past the Federal Reserve’s target. 

The core personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, rose 3.1% from a year ago. It even surpassed market expectations.

Although the high reading was due partly to the base effect- prices were depressed in April of last year due to strict lockdowns. Its annual raise is expected to moderate later this year, but some investors remained nervous. 

U.S. debt yields fell in a shortened session on Friday before a long weekend as month-end buying affected data.

The 10-year U.S. Treasury yield declined 2.9 basis points to 1.581%, marking the second month in a row of declines after having risen sharply earlier in 2021 on inflation fears. 

When it comes to cryptocurrencies, the price of bitcoin declined to $34,470 edging near a one-week intraday day low of $33,425 on Sunday. It was down 40% so far this month, on course for its biggest monthly fall since at least 2011.