Dollar gains ground; subdued yen prompts Japan warning By Reuters

Written by Amanda Cooper

LONDON (Reuters) – The dollar remained steady on Wednesday, offsetting some losses resulting from renewed bets on a cut in interest rates by the Federal Reserve (US central bank) this year, while the yen fell for a third day, raising investors’ concerns about the risk of intervention. From Tokyo.

In Europe, the Swedish krona came under pressure after the central bank cut interest rates and said it expected two additional cuts this year, while the pound remained stuck in negative territory ahead of the Bank of England's meeting the next day.

The yen remained at the forefront of currency traders' minds, falling for a third day and prompting Japanese officials to issue a stronger warning about the impact of the weak currency on the economy.

Traders believe that the Japanese authorities spent about $60 billion last week to support the yen after it recorded its lowest levels in 34 years against the dollar at about 160 yen.

Analysts said that any intervention by Tokyo would only provide a temporary respite for the yen, given the wide gap between interest rates in the United States and Japan.

“If we see a sudden, sharp rise in the USD/JPY rate, I would expect them to enter the market to support the yen. But if we continue to see a gradual move higher, I doubt they will come in,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:): “But there is clearly a risk.”

In the latest transactions, the dollar rose 0.45 percent against the yen to 155.375 yen, moving away from the lowest level recorded last week at 151.86 yen, against the backdrop of suspected interference.

The Fed wins over everything

Investors are focusing on the pace and timing of federal interest rate cuts that are likely to drive the currency market. The latest data showing weaker-than-expected job creation in the United States, coupled with an accommodative bias by the US central bank, has reinforced expectations that interest rates are likely to be lower by the end of the year.

In the latest trading, the dollar rose 0.18 percent to 105.6 against a basket of currencies, exceeding the lowest level in a month that it recorded last week.

Meanwhile, central banks in Europe have already begun cutting interest rates. The Swiss National Bank cut interest rates in March ahead of the Riksbank's move on Wednesday.

The ECB has signaled its intention to cut in June, assuming the data points in the right direction, and the Bank of England is gradually paving the way towards the first cut.

“What we're looking at is a large group of European central banks that will continue over the next few months, whether or not it's June or August. We have about a 50% chance of a Fed cut in September, but I think that's what it is,” Kathleen Brooks said. XTB Research Director: “Maybe he's the one who could be fired.”

“Right now, especially today, the focus is on the European cut first and we see upward pressure on the dollar,” she added.

The euro fell 0.12 percent to $1.074. Against the Swedish krona, the euro rose 0.6 percent to 11,752 krona.

The British pound fell 0.3 percent to $1.2474.

In cryptocurrencies, Bitcoin fell 1.2% to $62,225, heading for a fourth daily loss, the longest daily decline so far this year. Ether fell 1.6% to just under $3,000.