©Reuters. FILE PHOTO. A US one hundred dollar bill and Japanese 10,000 yen bills in this illustration image, taken in Tokyo, Japan. February 28, 2013. REUTERS/Shohei Miyano
By Tom Westbrook
SINGAPORE, April 29 (Reuters) – The dollar fell off 20-year highs on Friday but was on the cusp of its biggest monthly gain in a decade, fueled by bets on rising interest rates. in the United States and concerns about growth in Europe and China.
It has risen every week in April and this week has been thanks to the Bank of Japan, which on Thursday dropped the yen above 130 per dollar for the first time since 2002, when it reinforced its commitment to its policy of super-low yields. .
The yen stood at 130.53 per dollar at the time of writing, after falling as low as 131.25 on Thursday, following the Bank of Japan’s promise to buy endless amounts of bonds daily as needed. . The yen has fallen almost 7% in April, its worst month since November 2016.
Thursday’s decision further moved Japan away from the Federal Reserve, where markets are pricing in 150 basis points (bps) of gains in just three meetings, and sparked a new rush of funds into the dollar.
The , which hit a two-decade high of 103.93 after the yen tumbled, traded at 103.40 and was up more than 5.1% for the full month of April. If it stays at current levels, it would be its best monthly gain since May 2012.
Weaker-than-expected US quarterly growth data did not deter the dollar’s gains, with investors barely adjusting their bets on short-term interest rates.
The euro, meanwhile, fell to $1.05 on Thursday for the first time in five years and subsequently settled at $1.0526. In the Asian session, volume was lower than usual due to the holiday in Japan.
“Like the yen, the euro is increasingly undervalued against the US dollar,” said Lee Hardman, currency analyst at MUFG Bank.
“Market participants are increasingly appreciating the widening divergence that is opening up between the performance of the eurozone and US economies, and thus the outlook for European Central Bank and Reserve policies. Federal”.
The euro has lost almost 5% against the dollar in April and almost 7% against the dollar since the Russian invasion of Ukraine on February 24.
The conflict, and especially the disruption this week of Russian gas supplies to Poland and Bulgaria, has investors concerned about Europe’s energy security, inflation and growth.
Similar fears have driven the British pound to a 22-month low of $1.2412 it hit overnight. At $1.2507 in Asia, the British currency has lost almost 5% against the dollar in April, its worst performance since October 2016. [GBP/]
The prolonged COVID-19 lockdowns are also holding back an already sluggish Chinese economy, which has hit the yuan and commodity currencies.
The yuan hit an 18-month low of 6.6520 per dollar before rallying slightly to 6.6130 as state media reports of a Politburo meeting were seen as an indication the government would deploy more stimulus to meet its growth targets this year.
The currency is headed for a monthly drop of 4.1%, the biggest since the 1994 currency reforms.
The Australian dollar hit a three-month low of $0.7055 overnight, before recovering to $0.7152 on Friday, as investors think Australia’s tightening cycle will start as soon as next week.
The Australian dollar has lost 4.4% in April. The New Zealand dollar is headed for its worst month in seven years, having lost almost 6% against the dollar, it was up 0.5% at $0.6523.
(Reporting by Tom Westbrook; editing by Shri Navaratnam and Kim Coghill; translated by Tomás Cobos)