Alden Bentley, Samuel Indyk and Ankur Banerjee
NEW YORK/LONDON (Reuters) – The dollar fell from a nearly eight-week high on Monday with traders again poised to intervene to support the yen after the Japanese currency flirted with 160 to the dollar, prompting earlier verbal warnings from Japanese authorities.
The dollar/yen rate hit 159.94 in early trade, its highest level since April 29, when the yen hit a 34-year low of 160.245, prompting Japanese authorities to spend an estimated 9.8 trillion yen to support the currency.
It briefly fell to 158.75 per dollar in European morning trading and was last seen 0.28% lower at 159.35.
“It certainly didn’t look like an intervention… however, it does speak to how nervous the market probably is about the prospect of intervention,” said Michael Brown, senior research strategist at Pepperstone.
“I think that as long as further easing is not particularly rapid or disorderly, the MoF (Ministry of Finance) is unlikely to intervene.”
Earlier, Japan’s top currency diplomat, Masato Kanda, said authorities would take appropriate steps if foreign currency moves excessively, and that adding Japan to the U.S. Treasury watch list would not limit their actions.
The yen came under fresh pressure following the Bank of Japan’s (BOJ) decision this month to delay cutting its bond-buying stimulus until its July meeting. In June it decreased by 1.5%.
A roundup of views at the Bank of Japan’s June policy meeting on Monday showed some policymakers called for a timely rise in interest rates as they saw the risk of inflation beating expectations.
The yen, which is highly sensitive to U.S. Treasury yields, has fallen more than 10% against the dollar this year due to wide differences between Japanese and U.S. interest rates.
“We’re all trying to figure out whether there’s a specific level that the Treasury might have in mind in terms of protection, or whether it comes down to overall market conditions,” said Brian Dangerfield, currency strategist at Natwest Markets in Stamford. Connecticut.
AHEAD TEST FOR INFLATION
Focus this week will be Friday’s release of the U.S. Personal Consumer Expenditures (PCE) price index, which the Federal Reserve relies on to gauge progress in bringing inflation down to its 2% target.
Figures showing easing price pressures are likely to support bets on a rate cut as early as September, for which futures are currently pegged at a 70% chance.
The index, which measures the dollar against a basket of currencies including the yen and euro, fell 0.41% to 105.45, retreating from the nearly eight-week high of 105.91 it hit last week.
Another focus this week will be politics. The first US presidential debate between President Joe Biden and his predecessor Donald Trump will take place on Thursday after US markets close.
“There is certainly some interest in whether the dollar will be specifically mentioned,” Dangerfield said. “We know that former President Trump at times criticized the value of the dollar as being too strong.”
The first round of voting in France’s elections will take place on Sunday.
“In the first round of elections in France and the US presidential debates, you’ll see a lot of defensiveness,” said Simon Harvey, head of currency analysis at Monex.
The euro, which has been under pressure since French President Emmanuel Macron announced early elections earlier this month, rose 0.44% to $1.0738 but was still down about 1% in June.
France’s far-right National Rally party (RN) and its allies led the country’s first round of elections with 35.5% of the expected votes, an opinion poll released on Sunday showed.
North Carolina lawmaker Jean-Philippe Tanguy, widely seen as the most likely candidate to head the Treasury if the party wins to form a government, told Reuters the North Carolina government would adhere to European Union financial rules.
Sterling strengthened 0.28% to $1.268. The Australian dollar strengthened 0.18% against the greenback at $0.6651 and advanced 0.16%.
Meanwhile, the spot yuan traded at 7.2585 per dollar, near its lowest level in seven months, amid strong dollar strength and concerns about weakness in the world’s second-largest economy. [CNY/]
In cryptocurrencies, Bitcoin fell to its lowest level since May 10, down 4.52% to $61,267.00. decreased by 5.98% to $3,310.26.