U.S. dollar regains momentum as Japanese yen loses ground

The dollar was back on the front foot on Wednesday, making modest gains after earlier losses from renewed bets on Federal Reserve rate cuts this year, while the yen weakened past 155 per dollar and kept intervention risks from Tokyo high.

The yen fell 0.3% to 155.16 per dollar, edging away from its peak of 151.86 hit last week on the back of suspected intervention from Japanese authorities to prop up the sliding currency.

Temporary respite

Analysts have said that any intervention from Tokyo would only serve as a temporary respite for the yen, given stark interest rate differentials between the U.S. and Japan remain.

Bank of Japan Governor Kazuo Ueda said on Wednesday the central bank may take monetary policy action if yen declines a‡ect prices signi‹cantly, while the country’s Finance Minister Shunichi Suzuki repeated a warning that authorities were ready to respond to excessively-volatile moves in the currency market.

“If we were to see a sudden, sharp move up in dollar/yen then I would expect them to step into the market to support the yen. But if we continue to see a gradual move up, I doubt they’ll come in, but there’s obviously a risk,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

Investors are focussed on the pace and timing of Fed rate cuts that will likely drive currency moves, with the latest weakerthan-expected U.S. jobs data and an easing bias from the U.S. central bank cementing expectations that rates will likely be lower by the end of the year.

REUTERS Eye on the Fed: Investors are focussed on the pace and timing of Fed rate cuts that will likely drive currency moves.