© Reuters. FILE PHOTO: A Japanese yen banknote is seen in this illustration photo taken on June 15, 2022. REUTERS/Florence Low/Illustration/File photo
Written by Ankur Banerjee and Harry Robertson
SINGAPORE/LONDON (Reuters) – The dollar fell slightly against the yen on Tuesday as markets remained on high alert for signs of Japanese intervention, while the Australian dollar rose after the country’s central bank kept interest rates steady.
The dollar was down 0.19% by 0833 GMT, at 144.45 yen, after rising 0.27% on Monday.
However, the yen remained close to an eight-month low last week at 145.07 per dollar, prompting Japanese Finance Minister Shunichi Suzuki to warn against excessive yen selling.
The Reserve Bank of Australia (RBA) kept interest rates steady at 4.10% on Tuesday, saying it wanted more time to assess the impact of previous hikes, but warned that further tightening may be necessary to bring down inflation.
The Australian dollar bounced around, but was up 0.13% at 0833 GMT, at $0.668.
Markets were leaning towards the central bank keeping interest rates steady after inflation eased slightly more than expected in May. But economists were divided, with 16 out of 31 polled by Reuters expecting a rate increase, and the rest expecting the bank to maintain current rates.
Market activity was relatively subdued on Tuesday with US trade closed for the July 4th public holiday. Investors were also awaiting the closely watched US Non-Farm Payrolls report on Friday, which is likely to influence the upcoming decision of the Federal Reserve.
The euro fell 0.13% against the dollar at $1.09, while the pound sterling roughly settled at $1.269.
The greenback, which measures the greenback against six major peers, was also little changed at 103.
“It seems that every week will bring something, and this week we are waiting for the US non-farm payrolls,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.
Across currency markets, investors also remained on the lookout for possible intervention by the Japanese authorities to stem the yen’s losses.
Earlier on Tuesday, Japan’s top financial diplomat, Masato Kanda, said officials are in close contact with US Treasury Secretary Janet Yellen and other outside authorities almost every day about currencies and the broader financial markets.
“This sends signals that coordinated intervention may be coming as the yen continues to hover above 144 against the dollar,” said Charo Chanana, market analyst at Saxo Markets.
“A coordinated intervention usually has a longer-lasting effect on yen than a unilateral intervention.”
Japan bought the yen in September, its first foray into the market to boost its currency since 1998, as the Bank of Japan’s pledge to maintain a very loose policy for as long as required sent the yen down to 145 against the dollar. He intervened again in October after the yen fell to a 32-year low of 151.94.
RBC’s Tan said he thinks the dollar is likely to rally beyond 150 yen.
“The Bank of Japan is still not willing yet to move away from GCC policy, this will lead to a rise in the dollar,” he said, referring to Japan’s yield curve control that keeps bond market rates low.
Such a move would make intervention “more likely than not,” Tan said.