Apr 3 2024: The dollar index remained close to its highest level in over four months on Wednesday, keeping the yen near its lowest levels in decades. However, concerns about potential currency intervention by Tokyo limited further declines in the Japanese currency.
The euro and pound held steady against the dollar, with the euro at $1.0776 and the pound at $1.2575. The dollar index, which tracks the dollar against six major peers, was flat at 104.72, having briefly surpassed 105 on Tuesday.
Despite data showing a surprise drop in euro zone inflation, indicating a likely rate cut by the European Central Bank in June, the euro remained resilient as markets had already priced in such a move.
The Japanese yen hovered around 151.7 per dollar, slightly recovering from recent lows of 151.975. The Bank of Japan’s cautious approach to rate increases has contributed to the yen’s weakness, although Japanese officials have attempted to talk up the currency.
Market analysts noted concerns about the 152 yen per dollar level, with geopolitical tensions potentially influencing safe haven bids for currencies like the yen and Swiss franc. However, the dollar remained attractive due to higher yields, with the U.S. Treasury yield hitting a four-month high.
Traders anticipate rate cuts by the Federal Reserve this year but remain cautious as Fed officials have indicated a measured approach to easing rates. The Chinese yuan also faced pressure, standing at 7.2357 per dollar in the onshore market.
Overall, market sentiment is influenced by economic data, geopolitical tensions, and central bank policies, with currencies like the yen, dollar, and yuan reflecting these dynamics.