US dollar hits 7-month high against yen; ECB comments boost euro
THE US dollar rose to a seven-month high against the yen on Tuesday (Jun 27) before paring its gains, with investors on the look-out for possible intervention by Japan to boost the ailing currency.
Meanwhile, the euro picked up against the US dollar as investors listened closely to policymakers’ speeches at the European Central Bank’s (ECB) annual forum at Sintra in Portugal.
The US dollar rose to 143.94 yen, its highest since Nov 10, despite Japanese officials vowing to respond appropriately if currency moves became excessive. It was last up 0.1 per cent at 143.63 yen to the US dollar.
Finance Minister Shunichi Suzuki said on Tuesday: “We will closely watch currency market moves with a strong sense of urgency and will respond appropriately if the moves become excessive.”
Japan intervened to boost the yen last year when it weakened past the 145 per US dollar level. It has recently fallen sharply as US interest rates have soared above those in Japan, making US bonds look more attractive.
Many investors and analysts believe intervention is a possibility after the government stepped up its comments on the situation in recent weeks.
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“If big data comes out of the US in the next couple of weeks (and) US dollar-yen spikes above 145, then I would think that the Bank of Japan would step in, or threaten to step in,” Francesco Pesole, currency strategist at ING, said.
The euro was last up 0.37 per cent against the US dollar at US$1.095, after rising slightly on Monday.
“Euro-US dollar is a bit stronger this morning, we had probably a bit of help from hawkish ECB (European Central Bank) comments this morning,” said ING’s Pesole.
Latvian central bank governor and ECB official Martins Kazaks said in Portugal on Tuesday that the central bank will likely keep hiking interest rates after July.
The eurozone’s key interest rate currently stands at 3.5 per cent. Kazaks’ comments suggest they could go to 4 per cent or higher.
ECB President Christine Lagarde also spoke in Sintra on Tuesday, saying that “policy needs to be decided meeting by meeting and has to remain data-dependent”.
The US dollar index was 0.19 per cent lower at 102.55, weighed down by the euro, which is its biggest component.
Federal Reserve chair Jerome Powell, Bank of England governor Andrew Bailey, and Bank of Japan governor Kazuo Ueda are due to speak at a panel with Lagarde on Wednesday.
Investors also had US data to look forward to, with durable goods orders and building permits figures due later on Tuesday.
Elsewhere, the Russian rouble weakened 0.93 per cent versus the US dollar to 85.19. It hit its weakest level since March 2022 on Monday at 87 roubles to the US dollar.
Russian President Vladimir Putin said on Monday he let an aborted mutiny go on as long as it did to avoid bloodshed. On Tuesday, Russia’s security service dropped its criminal case against the Wagner mercenary group over the brief rebellion.
Sterling was last trading at US$1.272, up less than 0.1 per cent on the day.
The US dollar fell 0.36 per cent against the offshore Chinese yuan to 7.217 on Tuesday, after hitting a 7-month high of 7.243 on Monday.
Investors braced for the possibility of more support measures after China returned from a holiday on Monday. China’s central bank set its daily yuan fixing stronger than market expectations for a second day in a row on Tuesday.
Sources said state-owned banks had been selling US dollars in the offshore spot foreign exchange market, increasing speculation authorities were becoming less tolerant of yuan weakness. REUTERS
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