The dollar remained on the defensive on Wednesday after downbeat comments from Federal Reserve Chairman Jerome Powell sent U.S. bond yields lower, overshadowing a strong national jobs report.
The euro held firm, helped by stubbornly high local inflation on Tuesday. Sterling held steady ahead of Thursday’s UK elections.
However, the yen continued to languish near a 38-year low against the dollar amid the increased possibility of a second Donald Trump presidency, which could likely send long-term Treasury yields higher.
The dollar index, which measures the currency against the euro, sterling, yen and three other major currencies, was little changed at 105.66 in early Asian trading, after falling 0.14% in the previous session.
The euro was steady at $1.0749, trading near the top of its range since mid-June.
The pound held at $1.2689 after rising 0.28% on Tuesday.
The yen was at 161.54 per dollar, after hitting its lowest level since December 1986 on Tuesday at 161.745.
Traders remain on alert for another round of Japanese official intervention, after the Bank of Japan and the Finance Ministry spent some 9.8 trillion yen ($60.67 billion) between late April and early May, when the currency plunged to 160.82 per dollar. Some have speculated that authorities could act on Thursday, when low liquidity due to a U.S. holiday would exacerbate market moves.
President Joe Biden’s poor performance in last month’s debate triggered a rise in long-term Treasury yields amid heightened risks that Trump could retake the White House, leading to more tariffs and spending.
Yields have fallen this week, however, as Fed chief Powell told a European Central Bank conference in Sintra, Portugal, on Tuesday that the U.S. economy had made significant progress on inflation, although he added that more supportive data was needed to start cutting interest rates.
The 10-year Treasury yield edged down to 4.4336% in Tokyo hours, after hitting 4.4930% earlier in the week.
The increased chances of a Trump presidency have “moved the bar higher for USD/JPY,” said Tony Sycamore, a market analyst at IG.
“A Trump presidency would likely lead to higher fiscal deficits, inflation and yields at the mid- and long-end of the US yield curve, countering the impact of Fed rate cuts,” he added. “This possibility will likely see the BOJ save its intervention bullets for now.”
U.S. data showed job openings rose in May after posting significant declines in the previous two months. The closely watched monthly payrolls report is due out Friday.
Meanwhile, eurozone inflation eased last month, but a crucial services component remained stubbornly high, fuelling concerns that domestic price pressures could remain elevated.
Elsewhere, the Australian dollar rose 0.11% to $0.6675, helped by better-than-estimated retail sales data.
The Chinese yuan remained near its lowest level since mid-November, as local authorities appeared willing to tolerate its decline. In offshore trading, the yuan was steady at 7.3077 per dollar, just off Tuesday’s low of 7.3094. ($1 = 161.5300 yen)
