Dollar fell to its lowest level in 3 months against yen

The dollar fell to a three-month low against the yen on Thursday, as investors focused on Federal Reserve Chairman Jerome Powell’s remarks about the possibility of slowing the pace of interest rate hikes “as early as December.”

Powell said on Wednesday that slowing the pace at this point is a good way to balance risks,” but added that controlling inflation “will require keeping policy at a restrictive level for a while.”

The greenback last fell 1.32 percent to 136.295 yen, after falling to 136.205 yen, its lowest level against the Japanese currency since August 26.

The relationship between the dollar and the yen is very sensitive to any changes in long-term US Treasury yields, which fell Wednesday night after Powell’s comments, approaching their lowest levels in two months at 3.6 percent. The yield in the latest Tokyo trade was 3.6163 percent.

Markets are assessing a 91 percent chance that the Federal Reserve will raise interest rates by 50 basis points at its next meeting, against a 9 percent chance of raising interest rates by 75 basis points again. Increases of less than 5 percent are expected to peak in May.

The dollar index, which measures the performance of the US currency against six major currencies, including the yen and the euro, continued its decline from Wednesday’s session by more than 1 percent, dropping another 0.28 percent to 105.48. The index plunged 5.2 percent in November, its worst monthly performance since September 2010.

The euro rose 0.39 percent to $1.04485, retracing the trend towards a five-month high of $1.0497 that it hit earlier in the week.

The pound rose 0.36 percent to $1.2102, close to the three-month high it hit last week at $1.2153.

Risk-sensitive currencies also rose, with the Australian dollar last rising 0.55% to $0.6826, its highest since Sept. 13. The New Zealand dollar rose 0.69% to $0.63405, after touching $0.6325, the highest level since August 17.

The Australian and New Zealand currencies were supported by indications of the Chinese government’s easing of “zero Covid” policy measures.

The Chinese yuan witnessed some fluctuations in foreign transactions, after media reports said that the capital, Beijing, would allow some to quarantine at home. The dollar rose in its latest transactions 0.12 percent, recording 7.0546 yuan, after falling 0.3 percent to its lowest level in two weeks at 7.0256 yuan.