In Singapore, the dollar remained relatively stable on Monday, supported by expectations that the Federal Reserve might still cut rates twice this year following a softer-than-expected U.S. jobs report. At the same time, the yen began the week slightly weaker.
Last week, the yen saw its most robust weekly gain in over 17 months, driven by suspected Japanese government interventions to prevent the currency from plummeting to a 34-year low of 160.245 against the dollar. On Monday, the yen weakened by 0.43% to 153.62 per dollar in early trading, having reached a three-week high of 151.86 on Friday as the dollar continued to lose ground after the release of the jobs data.
Although Mainland China's markets were closed for three days last week, the offshore yuan strengthened against the dollar due to the dollar's broad retreat following the cooling U.S. jobs market data. Additionally, Fed Chair Jerome Powell confirmed the central bank's easing bias, and Japan intervened to push the yen higher. The offshore yuan was last at 7.1959 per dollar, having gained more than 1% last week.
With Japan and Britain closed for holidays on Monday, trading volumes are expected to be lower. However, traders remain vigilant after Japanese authorities intervened in the yen market during last wek's quiet periods.
Analysts estimate that the Bank of Japan spent more than 9 trillion yen to support the yen last week, but this may only provide temporary relief as the market still considers the currency a sell. Non-commercial traders reduced their yen short positions to 168,388 futures contracts in the week ended April 30, still close to their largest bearish positions since 2007.
Goldman Sachs strategists noted that while Japan could intervene further, the broader macro environment remains negative for the yen. They suggested that buying time through intervention could reduce the potential for economic disruptions from exchange rate adjustments and stabilize the currency until the economic backdrop becomes more supportive for the yen.
Regarding the Fed's path, data on Friday showed that U.S. job growth slowed more than expected in April, and the increase in annual wages fell below 4.0% for the first time in nearly three years. This raised optimism that the Fed could achieve a "soft landing" for the economy. Markets are now pricing in 45 basis points of cuts this year, with a rate cut in November fully priced in.
While the Fed held interest rates steady at its recent meeting, it signaled a leaning towards eventual rate cuts, even if they may take longer than initially expected. The dollar index, which measures the U.S. currency against six rivals, was at 105.12, having touched a three-week low of 104.52 on Friday.
The euro was up 0.07% at $1.0765, while the sterling was last at $1.2547, up 0.02% on the day.