Bonda Asia: Multiple positive factors support the dollar-yen, closing slightly higher

April 3, Thursday, the Federal Reserve’s “number three,” New York Fed President Williamms, said that the risks facing current inflation and employment are roughly balanced, supporting keeping interest rates unchanged. In a media interview, Williams noted that, given the policy adjustments since last year and the current level of interest rates, monetary policy “is in a good position,” and can achieve a balance between the two major goals of inflation and employment. He believes that the most important thing right now is to maintain this balance rather than rush to adjust interest rates. On financial stability, Williams said that recent redemption pressure in the non-bank credit sector (i.e., private credit) does not constitute a systemic risk. He pointed out that these fluctuations are mainly driven by the repricing of loans rather than systemic issues, and emphasized that regulators are closely monitoring risk exposures related to the banking system. Regarding whether some private credit funds face a “too big to fail” problem, Williams said clearly, “There is none.”

In addition, the latest update from the International Monetary Fund (IMF) says that although the U.S. inflation rate is expected to fall back to the Fed’s 2% target level in the first half of 2027, policymakers this year have virtually no room to cut rates. Based on the IMF’s annual assessment of the U.S. economy, its staff expect the Federal Reserve to cut rates only once by the end of 2026. Overall, the staff believes that there is little room to lower policy interest rates over the next year. Article IV consultations are the IMF’s routine judgment and assessment each year of member countries’ economic performance and macroeconomic policies. In its statement, the IMF staff said: “More substantial monetary easing needs to be premised on a significant deterioration in labor market prospects, while inflation pressures cannot rise, including a rise in near-term inflation expectations due to increases in oil prices and commodity prices.”

Today, the data to watch are the U.S. March nonfarm payroll employment change after seasonal adjustment and the U.S. March unemployment rate.

AUD/USD

The Australian dollar was choppy and trended lower yesterday, with the daily chart closing slightly down. The spot price is trading near 0.6910. In addition to profit-taking and pullbacks putting some downward pressure on the exchange rate, the market’s renewed risk-aversion sentiment also puts some downward pressure on the Australian dollar. Moreover, the U.S. Dollar Index rising on the support of solid economic data and demand for safe-haven buying is also an important factor weighing on the Australian dollar. Today, watch the level of pressure around 0.7000; support lies around 0.6800.

USD/JPY

The USD/JPY was choppy and trended higher yesterday, with the daily chart closing slightly up. The spot price is trading near 159.60. In addition to some support from short-covering, the U.S. Dollar Index recovering the 100.00 level on the support of solid economic data and safe-haven buying also provides some support to the exchange rate. Furthermore, expectations that the Bank of Japan will hold steady on policy this month also add some support to the exchange rate. However, concerns that the Bank of Japan could intervene in the FX market again limit the upside room for the exchange rate. Today, watch the level of pressure around 160.50; support lies around 158.50.

USD/CAD

The USD/CAD was choppy and trended higher yesterday, with the daily chart closing slightly up. The spot price is trading near 1.3920. In addition to some support from short-covering, the U.S. Dollar Index rising on the support of multiple positive factors is also an important factor supporting the exchange rate’s rebound. However, the renewed tensions in the Middle East have reignited, with oil prices climbing sharply, which limits the exchange rate’s rebound room. Today, watch the level of pressure around 1.4000; support lies around 1.3800.

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