NEW YORK/LONDON >> The dollar fell against the yen today, after Japanese officials stepped up verbal intervention to stem the currency’s decline, even as the greenback headed for its biggest weekly rise in six weeks.
Against other major currencies, the U.S. unit was well bid, with the dollar index hitting its highest since late May.
The yen popped higher after Japanese Finance Minister Satsuki Katayama said intervention was a possibility to deal with excessively volatile and speculative moves, leaving traders on alert for signs of yen buying from Tokyo.
Meanwhile, remarks from New York Fed President John Williams today, that the U.S. central bank can still cut interest rates “in the near term” without putting its inflation goal at risk, also helped cap the dollar’s strength.
“Williams is often seen as in line with (Fed) Chair (Jerome) Powell. So, the idea is if Williams is in favor of a cut in the near term as he says, probably the expectation is Chair Powell is, and that could carry some weight with some of the undecideds on the committee,” said John Velis, head of Americas macro strategy at BNY Markets.
“It has raised the market’s expectation of a rate cut in December, which has really been dashed just a couple of days ago with the postponement of the jobs data to after the FOMC.”
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In late morning trading, the Japanese currency was up 0.57% to 156.585 per dollar. It hit a 10-month low of 157.90 on Thursday and was still on track for a 1.2% loss for the week.
Much of the focus in currency markets this week has been on the yen, which has plumbed fresh lows as investors worry about the nation’s worsening fiscal position brought about by Prime Minister Sanae Takaichi’s lavish spending policies.
The yen has fallen around 6% since Takaichi was elected leader of her party on October 4. Takaichi’s cabinet approved a 21.3 trillion yen ($135.4 billion) economic stimulus package today.
“It’s still a push and pull between the BoJ and the new prime minister. She is super business friendly and wants to keep markets in a very comfortable position,” said Michael Boutros, senior technical strategist at StoneX. “But I don’t think they are going to move on rates any time soon. If anything, we might start to get intervention talks, more sabre rattling just because of the moves.”
Tokyo last spent 5.53 trillion yen, or nearly $37 billion, in July 2024 to intervene in the foreign exchange market to haul the yen away from 38-year lows.
Against the euro, the yen was pinned near its lowest since the introduction of the single currency, although the euro was last down 0.89% at 179.91 yen.
In the broader market, the dollar was set for a weekly gain, and markets are now betting the Federal Reserve will cut rates again next month.
The release of a delayed U.S. nonfarm payrolls report on Thursday painted a mixed picture of the country’s labour market and did little to alter expectations about a Fed rate cut in December, as policymakers continue to navigate through an economic fog brought about by the U.S. government shutdown.
Fed funds futures traders are now pricing in a 73% chance of a December cut, up from 39% on Thursday, according to the CME Group’s FedWatch Tool.
The euro fell 0.24% to $1.1501 and was on track for a 1.06% weekly decline.
It held steady after preliminary PMI data showed euro zone business activity grew steadily this month, even as manufacturing activity slipped into contractionary territory.
Sterling stood at $1.3081 as investors awaited Britain’s upcoming budget, with data showing the economy struggled before next week’s major test for the currency and bond market. The pound was set to lose 0.7% for the week.
The dollar index, which measures the greenback against a basket of other major currencies, flirted with a 5-1/2-month peak and last stood at 100.25.
In cryptocurrencies, bitcoin fell to a seven-month low, and was last down 4.95% at $82,905.03.
Additional reporting by Samuel Indyk and Rae Wee.
AloJapan.com