Dollar Gains Momentum While Yen Weakens

On Wednesday, the dollar regained its momentum, marking modest gains following earlier losses fueled by renewed speculation about potential Federal Reserve rate cuts later this year. Meanwhile, the yen weakened, surpassing the 155 per dollar mark and keeping intervention concerns from Tokyo at the forefront.

Experiencing a 0.3% decline, the yen traded at 155.16 per dollar, gradually distancing itself from last week’s peak of 151.86, which occurred amidst suspicions of Japanese authorities intervening to bolster the depreciating currency.

Analysts underscored that any intervention from Tokyo would likely offer only temporary relief for the yen, as substantial interest rate differentials between the U.S. and Japan persist.

Bank of Japan Governor Kazuo Ueda hinted at potential monetary policy actions in response to significant yen depreciations affecting prices. Echoing this sentiment, Finance Minister Shunichi Suzuki reiterated the readiness of authorities to address excessively volatile currency market movements.

Currency strategist Carol Kong from the Commonwealth Bank of Australia noted that while authorities might step in to support the yen in the face of abrupt, sharp moves in the dollar/yen pair, gradual upward trends may not trigger intervention, albeit with inherent risks.

The euro dipped by 0.13% to $1.0741, while the New Zealand dollar edged down by 0.17% to $0.5992. The greenback, measured against a basket of currencies, ascended by 0.12% to 105.55, distancing itself from the roughly one-month low it touched last week.

Investor attention remained fixated on the trajectory and timing of potential Fed rate cuts, with recent weaker-than-expected U.S. job data and a dovish tilt from the central bank solidifying expectations of lower rates by year-end. Minneapolis Fed President Neel Kashkari’s remarks on Tuesday, cautioning against prematurely declaring the halt of inflation, failed to sway market expectations for rate cuts.

Elsewhere, the sterling eased by 0.18% to $1.2487, ahead of the Bank of England’s upcoming policy decision on Thursday, where focus will center on the potential timing of rate cuts. Analysts anticipate the central bank leaving the door open to rate cuts as early as June.

The Australian dollar retreated by 0.33% to $0.65765, partially influenced by a less hawkish outlook from the Reserve Bank of Australia than initially anticipated following its decision to maintain steady interest rates on Tuesday.