WASHINGTON/LONDON: The Japanese yen further weakened against the dollar on Wednesday, hovering in a zone that last year triggered intervention, while the yuan slipped to a nine-month trough as concerns mounted about the extent of China’s slowdown.
The yen has hit the key 145 per dollar level for four sessions now, a zone that triggered heavy dollar selling by Japanese authorities in September and October last year. It last weakened 0.13% versus the greenback to 145.75 per dollar, after hitting 145.940 earlier in the session, a level not seen since November.
Finance Minister Shunichi Suzuki said on Tuesday authorities were not targeting absolute currency levels for intervention.
“Markets are concerned whether the Bank of Japan will intervene or whether dollar-yen needs to go all the way up to 150,” said Niels Christensen, chief analyst at Nordea.
“They have not been so loud in the last week, but the threat of intervention is why the market has been a little bit hesitant to push dollar-yen up.”
Elsewhere in Asia, the yuan touched its lowest level since November in both the onshore and offshore markets, falling as low as 7.3379.
That extended Tuesday’s decline following Chinese data that missed forecasts and prompted Beijing to deliver unexpected cuts to its key policy rates as authorities there sought to shore up an economy that has rapidly lost steam in recent months.
The Australian dollar, often used as a liquid proxy for the yuan, plumbed nine-month lows in response to the Chinese data.
“I really don’t think that the backdrop is conducive for a sustained risk rally at this point,” said Bipan Rai, global head of FX strategy at CIBC Capital Markets. “Not only the China data, it’s also the fact that we’re dealing with tighter monetary conditions globally, and that’s going to crimp demand at the margin.”
Central bank watch
The pound was up after data showed British core inflation stayed strong in July, hitting a high of $1.2768 and was last up around 0.45% at $1.2759.
Core inflation in Britain, which strips out volatile energy and food prices, remained at 6.9% in July, flat versus the June reading, and higher than expectations in a Reuters poll for a reading of 6.8%.
The dollar index was off 0.087% at 103.100, though it was not far from an over one-month peak hit on Monday, driven by higher bond yields following upbeat US data. The euro gained 0.12% to $1.0917.
The New Zealand dollar, which had fallen to a nine-month low of $0.5932 in early Asian trade, rebounded after the Reserve Bank of New Zealand policy meeting, to trade higher by 0.11% versus the greenback at $0.596.
The central bank held its cash rate steady as expected on Wednesday, but slightly pushed out when it expects to start cutting borrowing costs to 2025.
“The statement gave a clearly more hawkish tone, likely defying any dovish expectations,” said Barclays research analyst Shreya Sodhani.
“We think today’s more hawkish statement and the governor’s press conference suggest that the timing of rate cuts will likely be pushed back a bit.”
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