NEW YORK: The dollar dipped from a one-week high on Wednesday after four straight daily advances, while the yen recovered slightly from its weakest level in nearly four decades as traders gauged the likelihood of intervention from Tokyo and the chances of faster rate hikes by the Bank of Japan.
The dollar has been rising in recent days as increased tensions in the US-Iran war have caused a reversal in oil prices and again fanned inflation fears.
Oil prices touched their highest in almost six weeks, with US crude last up 3.28 percent to USD87.11 a barrel and Brent at USD94.34 per barrel, up 3.66 percent, as concerns about supply disruptions increased. Four more tankers changed course in the Red Sea on Wednesday after Iran-aligned Houthis in Yemen threatened the southern route out, while US Secretary of State Marco Rubio said Iran was not serious about peace talks.
The dollar index, which measures the greenback against a basket of currencies, fell 0.08 percent to 101.10, with the euro up 0.12 percent at USD1.1411.
Crude prices had been coming down since May on optimism a durable peace deal could be reached and, along with cool US inflation readings, dented market expectations for rate hikes from the Federal Reserve.
Expectations for a hike from the Fed at its July meeting have been edging back up along with oil prices, with markets now pricing in a 26.2 percent chance for an increase, according to CME FedWatch, up from 10.7 percent a week ago.
The Japanese yen strengthened 0.07 percent against the greenback to 163.04 per dollar. The currency weakened to 163.23 on Tuesday, its lowest since December 1986 as investors adjust to a changing policy backdrop under Japanese Prime Minister Sanae Takaichi, whose administration has struggled to shake off views that it may pressure the Bank of Japan (BOJ) to delay further rate hikes. Markets are currently pricing in about 27 basis points of hikes from the central bank this year, according to LSEG data. Reuters reported that the BOJ remains on alert to upside inflation risks that could lead to faster interest rate hikes than markets project, according to three sources familiar with its thinking. Japan’s Finance Minister Satsuki Katayama has said authorities would take decisive action if needed to curb excessive currency weakness. Tokyo had intervened in April and May, when the yen weakened beyond the 160-per-dollar level.
Comments