NEW YORK: The Japanese yen steadied on Wednesday after historic intervention, while the dollar traded around six-week lows against other currencies as revived hopes of an end to the war in Iran blunted safe-haven demand.
The yen was last up 0.15 percent at 157.53 per dollar, slightly stronger on the day, having fallen 0.4 percent on Tuesday. On Monday, it hit as little as 155.2 per dollar, having traded at its weakest in 40 years, around 164 per dollar a week earlier.
US Treasury Secretary Scott Bessent on Tuesday said the US would do “whatever it takes” to support Japan’s efforts to stabilize the yen, echoing the words of former European Central Bank President Mario Draghi, who in 2012 pledged the same to preserve the euro during the regional debt crisis.
“I don’t think the central banks are really defending a fixed level but the market is still going to challenge the central bank’s resolve,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets.
In terms of macro events, the US monthly employment report on Friday could help shape expectations for near-term Fed policy.
The dollar hit its lowest against the Japanese currency in three months after joint purchases on Friday by Tokyo and Washington — the first yen-buying intervention for US authorities since 1998 — and fell further on Monday.
Since then, it has strengthened against the yen, suggesting investors are sceptical about how effective intervention can be in the longer run.
“The phrase ‘sticking plaster’ does feel relatively appropriate in many instances. The reality is, I think it is nothing more than a containment exercise, unless you get one of three criteria,” CIBC Capital Markets head of G10 FX strategy Jeremy Stretch said.
He said broadly, the three criteria would be a more aggressive approach to rate hikes from the Bank of Japan, markets pricing in a lower chance of rate increases from the Federal Reserve, and a lower oil price.
The dollar index, which tracks the US currency against six others, was 0.12 percent lower at 99.67 after hitting a six-week low on Monday. With the oil price back around USD80 a barrel and US President Donald Trump saying his administration had “very good discussions” with Iran, investors had less incentive to buy the dollar as a safe haven.
The euro rose 0.15 percent to USD1.1551, while the pound edged up 0.2 percent to USD1.3477.