Yen Struggles Amid Calmer Currency Markets and Fed Rate Cut Speculations

The yen declined against the dollar following a volatile week in currency markets. Investors are assessing the likelihood of a significant Federal Reserve rate cut next month, amid mixed U.S. economic data. Recent stronger-than-expected U.S. jobs data have led to reduced expectations for Fed rate cuts this year.

The yen fell against the dollar on Monday during calmer trading in the currency market, as investors evaluated the chances of a significant Federal Reserve rate cut next month, following volatile movements last week. This peaceful trading comes after a hectic week that saw a massive sell-off across currencies and stock markets, fueled by concerns about the U.S. economy and the Bank of Japan's assertiveness.

The week ended on a calmer note, with stronger-than-expected U.S. jobs data on Thursday causing markets to reduce their expectations for Federal Reserve interest rate cuts this year. 'If global investor risk sentiment continues to improve in the week ahead, it is likely that market expectations for Fed rate cuts will continue to be scaled back,' said currency analysts at MUFG in a note.

However, investors are still pricing in 100 basis points of Fed cuts by year-end, according to the CME Group's FedWatch tool, with U.S. producer and consumer prices data due on Tuesday and Wednesday potentially influencing market perceptions. 'It's more a case of market squaring up a little bit ahead of the U.S. inflation data,' said Christopher Wong, currency strategist at OCBC Bank in Singapore.

(With inputs from agencies.)