May 8 2024: The dollar regained ground on Wednesday, posting modest gains following previous losses driven by renewed speculations about potential Federal Reserve rate cuts this year. Meanwhile, the yen saw a decline beyond 155 per dollar, raising concerns about potential intervention from Tokyo.
The yen slipped by 0.3% to 155.16 per dollar, moving away from its recent peak of 151.86 last week, which some attributed to suspected intervention efforts by Japanese authorities aimed at shoring up the currency.
Analysts suggest that any intervention by Tokyo would provide only temporary relief to the yen, given the significant interest rate differences between the U.S. and Japan.
Bank of Japan Governor Kazuo Ueda mentioned on Wednesday that the central bank might consider monetary policy measures if the yen’s decline significantly impacts prices. Similarly, Finance Minister Shunichi Suzuki reiterated that authorities were prepared to address excessively volatile movements in the currency market.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, noted, “If we were to see a sudden, sharp move in dollar/yen, then I would expect them to intervene to support the yen. But if we continue to see a gradual rise, I doubt they’ll intervene, but there’s certainly a risk.”
The euro dipped by 0.13% to $1.0741, while the New Zealand dollar edged 0.17% lower to $0.5992.
The greenback gained 0.12% against a basket of currencies, reaching 105.55, distancing itself from a one-month low seen last week.
Investors remain focused on the pace and timing of potential Fed rate cuts, with recent weaker U.S. jobs data and a dovish stance from the central bank reinforcing expectations of lower rates by year-end.
Minneapolis Fed President Neel Kashkari’s comments on Tuesday about the uncertainty of inflation’s trajectory had minimal impact on market expectations for rate adjustments.
Rodrigo Catril, senior FX strategist at National Australia Bank, commented, “The market shrugged off comments from Minneapolis Fed President Kashkari, who is on the hawkish side and is a non-voter this year.”
Sterling eased by 0.18% to $1.2487 ahead of the Bank of England’s policy decision on Thursday, where attention will be on potential rate cuts in the near future.
The Australian dollar declined by 0.33% to $0.65765, partly influenced by a less hawkish outlook from the Reserve Bank of Australia following its decision to hold interest rates steady on Tuesday.
