The dollar returned to center stage on Wednesday, posting modest gains after earlier losses due to renewed bets on Federal Reserve rate cuts this year, while the yen edged closer to the 155 level for a dollar and kept Tokyo’s risks of intervention high.
The offshore yuan fell from a more than three-month high reached last week, helped by hopes of further stimulus measures from Beijing to support its economy. It was last settled at 7.2247 per dollar.
The yen was little changed at 154.75 per dollar, moving away from its peak of 151.86 hit last week due to suspected intervention by Japanese authorities to prop up the weakening currency.
Analysts said any intervention by Tokyo would only be a temporary reprieve for the yen, given that interest rate differentials between the United States and Japan remain wide.
Bank of Japan Governor Kazuo Ueda said on Wednesday the central bank would examine the impact of yen movements on inflation as part of its monetary policy, while the country’s Finance Minister Shunichi Suzuki reiterated a warning that authorities were prepared to respond to excessively volatile movements in the currency market.
“If we were to see a sudden and sharp rise in the dollar against the yen, I would expect the authorities to intervene in the market to support the yen. But if we continue to see a gradual rise, I doubt that they’re stepping in, but obviously there’s a risk,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia.
The euro and New Zealand dollar fell 0.02% each, to $1.0752 and $0.6000, respectively.
Against a basket of currencies, the greenback was steady at 105.41, some distance from its roughly one-month low reached last week.
Investors continue to focus on the pace and timing of Fed rate cuts, which are expected to drive currency movements, the latest weaker-than-expected U.S. jobs data and the trend toward policy easing. US central bank reinforcing expectations that rates will likely be cut by the end of the year.
While Minneapolis Fed President Neel Kashkari said Tuesday it was too early to say inflation was permanently curbed, that did little to move the needle on market pricing for cuts rate.
“The market has brushed off comments from Minneapolis Fed President Kashkari, who is at the hawkish end of the spectrum and is a non-voter this year,” said Rodrigo Catril, senior FX strategist at National Australia Bank .
Elsewhere, the pound fell 0.08% to $1.2499, ahead of the Bank of England’s policy decision on Thursday, where the focus will be on when the central bank could start cutting rates .
Analysts expect the central bank to leave the door open to lowering interest rates as early as June.
The Australian dollar fell 0.2% to $0.6585, pressured by a less optimistic than expected outlook from the Reserve Bank of Australia, which kept interest rates unchanged on Tuesday.
