Market Analysis

Yen Gains on GDP Data; Australian and New Zealand Dollars Steady Pre-Rates

Amos Simanungkalit · 17 Feb64.3K Views

Image Credit: Reuters

The yen strengthened on Monday, supported by stronger-than-expected Japanese GDP data, while the Australian and New Zealand dollars remained steady ahead of upcoming policy decisions later in the week.

The U.S. dollar struggled, weighed down by recent weak U.S. economic data, which fueled expectations for more Federal Reserve rate cuts this year. The yen gained 0.27%, trading at 151.94 per dollar, reversing earlier losses after Japan's GDP data showed faster-than-anticipated growth in the fourth quarter, reinforcing expectations for additional rate hikes from the Bank of Japan (BOJ) this year. Traders are now pricing in around 35 basis points of rate hikes by December.

Marcel Thieliant from Capital Economics stated that while the GDP growth was not broad-based, it supports the view that the BOJ will tighten its policy more aggressively than expected.

In the broader market, the dollar remained weak after a selloff triggered by disappointing U.S. retail sales data and optimism around the delay in implementing Donald Trump’s reciprocal tariffs. Geopolitical developments, such as peace talks on the Russian-Ukraine conflict set to begin in Saudi Arabia this week, also supported the euro, which inched toward the $1.05 mark. The euro was last at $1.0487, while sterling was unchanged at $1.2582. The dollar index stood at 106.79, having fallen 1.2% last week.

Rodrigo Catril from National Australia Bank explained that the dollar weakness was partly due to optimism that tariffs may not be as disruptive as initially feared, and concerns that U.S. exceptionalism might be losing momentum, weighing on the dollar.

In Australia, the dollar edged up 0.07% to $0.6357 ahead of the Reserve Bank of Australia’s (RBA) rate decision on Tuesday, where a quarter-point cut is expected. The New Zealand dollar rose 0.03% to $0.5734, ahead of the Reserve Bank of New Zealand’s decision on Wednesday, where a 50-basis point cut is anticipated.