© Reuters. A merchant counts US dollar banknotes at a currency exchange booth in Peshawar, Pakistan, September 15, 2021. REUTERS/Faiz Aziz
Written by Ankur Banerjee and Alun John
SINGAPORE/LONDON (Reuters) – The yen was pressured against most other major currencies on Wednesday, even as Japanese authorities said they might intervene to support it, while the Australian dollar fell after data showed inflation eased in May.
Market expectations that the Bank of Japan (BOJ) will keep interest rates ultra-low, while other central banks tighten monetary policy to curb inflation, have been weighing on the Japanese currency, leading to speculation about whether and when the authorities will intervene to stop it. He refuses.
“We are closely watching the currency’s moves with a strong sense of urgency,” Japan’s top currency diplomat, Masato Kanda, told reporters on Wednesday.
“We will respond appropriately if it becomes excessive.”
The US dollar rose to 144.26 yen on Wednesday, a new seven-month high, while the euro rose to a 15-year high of 157.98 yen.
“It’s similar to what happened late last year when the yen started to weaken sharply and eventually Japanese officials stepped in to offer support,” said Lee Hardman, senior foreign exchange analyst at MUFG.
He said continued yen weakness to force intervention will depend on whether markets continue to price in at higher rates elsewhere, which will require more evidence of resilient economies and steady inflation, although this was not the base case for the MUFG.
Japan raided the currency market to support the yen last September and October to stop the currency’s decline, which reached a 32-year low of 151.94 per dollar.
Meanwhile, the Australian dollar fell to a three-week low of $0.6618 after domestic consumer price inflation slowed to a 13-month low in May.
It was last down 0.78% at $0.6634, and the neighboring New Zealand dollar fell 1.17% to $0.6090, its biggest daily drop in a month.
A measure of core inflation has also eased in Australia, a sign that interest rates may not have to rise again in July.
In Europe, the euro fell slightly against the dollar to $1.0950, while the pound fell more sharply, dropping 0.46% to $1.26895, as traders booked profits after the recent strong rally. (GBP/)
Traders are also watching the ongoing European Central Bank (ECB) central bank conference for any hints from policy makers on the path of future interest rate hikes.
US Federal Reserve Chairman Jerome Powell will sit on a panel later on Wednesday, along with Bank of England Governor Andrew Bailey, European Central Bank President Christine Lagarde and Bank of Japan Governor Kazuo Ueda.