Dollar Dips Yen Rallies on Ueda’s Comments

Summary:
The U.S. dollar fell in early European trade on Monday, retreating from its six-month high, largely due to significant gains in the Japanese yen. The yen surged after Bank of Japan Governor Kazuo Ueda hinted at a potential shift away from negative interest rates. The Dollar Index dropped 0.5% to 104.212, down from last week’s high of 105.15.
Meanwhile, the euro and British pound also experienced gains against the dollar. EUR/USD rose 0.2% to 1.0724 ahead of Thursday’s European Central Bank policy meeting, which faces uncertainty due to elevated price pressures and slowing economic activity. GBP/USD increased by 0.4% to 1.2518 as traders await compensation data for July.
Despite Monday’s losses, the dollar remains near its six-month high, supported by resilient U.S. economic data that has raised expectations for potential future rate hikes by the Federal Reserve. Key U.S. inflation data due this week will be closely watched for further monetary policy cues.
Additionally, the Chinese yuan rebounded from a 16-year low, driven by strong midpoint guidance from China’s central bank and positive inflation data, reflecting some economic improvement in China.