The yen pared its gains from last week as US equities rebounded, encouraging investors to resume carry trades.
The Federal Reserve surprisingly lowered its window rates to 5.75% last Friday, raising speculations that the Fed may cut interest rates this year. US interest rate futures pricing indicated traders see a 60 percent chance that the Fed will cut interest rates by 50 basis points to 4.75% on September 18 meeting. The Fed¡¯s action calmed nervous investors down and boosted US stock market.
The yen weakened against high-yielding currencies today as carry trade positions were rebuilt. The euro climbed from above 153 to test the 156 level against the yen, while the sterling strengthened from 225 to as high as 229.58 versus the yen. The dollar also gained nearly 200 pips to 115.50.
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