The yen received a much-needed reprieve on Tuesday as it stabilized at a higher level of 155 per dollar thanks to a decline in the US currency, which suffered profit-taking after a spectacular rally that saw it reach its highest level in a year.
The yen rose 0.2% to 154.40 per dollar, recovering from its previous session’s fall after Bank of Japan Governor Kazuo Ueda stuck to his usual script and did not not given any indication on the possibility of a rate increase in December.
“Recent weakness in the yen led many market participants to expect Mr. Ueda to be more optimistic, but ultimately the governor stuck to his usual rhetoric,” said Rodrigo Catril, senior strategist for currencies at the National Australia Bank.
“We believe the economy and price pressures argue for a hike in December, but much will depend on whether there is a political pushback as the PLD seeks to regain public support public, after a mediocre performance in the recent elections to the Lower House.
The yen has fallen some 7% since October and last week crossed the $156 mark for the first time since July, leaving traders on alert about possible intervention by Japanese authorities to support the currency.
In the broader market, the dollar was in decline, moving further away from last week’s one-year high against a basket of currencies.
The British pound settled at $1.2676, while the dollar index gained 0.04% to 106.26, after falling 0.4% overnight.
“You have profit-taking after big moves like this,” said Jarrod Kerr, chief economist at Kiwibank.
The greenback has risen more than 2% since the start of the month, supported by reduced expectations for the extent of the Federal Reserve’s rate cuts and expectations that policies touted by President-elect Donald Trump in tariffs, reduced immigration and debt-financed tax cuts will have an inflationary effect on the US economy.
The euro also rebounded from a one-year low last week and settled at $1.0590.
Two senior European Central Bank officials said Monday they were more concerned about the damage new U.S. tariffs could do to economic growth in the euro zone than about the impact on inflation.
Elsewhere, the Australian dollar fell 0.15% to $0.6499.
Minutes of the Reserve Bank of Australia’s November meeting, released on Tuesday, showed policymakers saw no immediate need to change interest rates, having left them stable for a year, but said it was important to be prepared to act as the economic outlook changed.
Markets have not fully priced in a rate cut until May next year, with the chance of a cut in February, after the fourth quarter inflation report, being only 38%.
The Reserve Bank of New Zealand, meanwhile, meets next week and traders have predicted 50 basis points of easing from the central bank.
The kiwi was last trading 0.24% lower at $0.5880.
