On Wednesday, the dollar regained its footing, posting modest gains following earlier losses attributed to renewed expectations of Federal Reserve rate cuts later this year, while the yen depreciated beyond 155 per dollar, heightening intervention risks from Tokyo.
The yen experienced a 0.3% decline, settling at 155.16 per dollar, stepping back from its recent peak of 151.86 reached last week amid suspected intervention efforts by Japanese authorities aimed at bolstering the weakening currency.
Analysts suggest that any intervention by Tokyo would likely provide only temporary relief for the yen, as significant interest rate differentials between the U.S. and Japan persist.
Bank of Japan Governor Kazuo Ueda stated on Wednesday that the central bank might implement monetary policy measures if yen depreciation significantly impacts prices. Meanwhile, Finance Minister Shunichi Suzuki reiterated warnings that authorities stood ready to counter excessively volatile movements in the currency market.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, remarked, “If we were to see a sudden, sharp move up in dollar/yen then I would expect them to step into the market to support the yen. But if we continue to see a gradual move up, I doubt they’ll come in, but there’s obviously a risk.”
The euro dipped by 0.13% to $1.0741, while the New Zealand dollar edged 0.17% lower to $0.5992.
Against a basket of currencies, the greenback rose by 0.12% to 105.55, distancing itself from a roughly one-month low reached last week.
Investors remained attentive to the pace and timing of potential Fed rate cuts, which are anticipated to influence currency movements. Weaker-than-expected U.S. jobs data and a dovish stance from the U.S. central bank have solidified expectations of lower rates by year-end.
Minneapolis Fed President Neel Kashkari’s remarks on Tuesday, suggesting it is premature to conclude that inflation has stalled, failed to significantly impact market expectations for rate cuts.
Rodrigo Catril, senior FX strategist at National Australia Bank, noted, “The market brushed off comments from Minneapolis Fed President Kashkari, who sits at the hawkish end of the spectrum and is a non-voter this year.
Elsewhere, the pound softened by 0.18% to $1.2487 ahead of the Bank of England’s policy decision on Thursday, with attention focused on the potential timing of rate cuts by the central bank.
Analysts anticipate the Bank of England to maintain the possibility of reducing interest rates as early as June.
The Australian dollar depreciated by 0.33% to $0.65765, partly influenced by a less hawkish outlook from the Reserve Bank of Australia following its decision to hold interest rates steady on Tuesday.