Persistent strength in the dollar sent the Japanese yen sliding to the key 160 level on Wednesday, on renewed hostilities in the Gulf.<\/p>\n
Olena Malik | Moment | Getty Images<\/p>\n
Underlying\u00a0dollar\u00a0strength pushed \u2060the Japanese yen back to the key 160 level on Wednesday, prompting verbal warnings from authorities and keeping traders on alert for intervention, as fresh Gulf hostilities \u200bbolstered demand for the\u00a0U.S. currency. <\/p>\n
The \u200bU.S. said\u00a0Iran\u00a0launched ballistic missiles \u200btoward regional neighbors but all failed to hit targets, and that\u00a0U.S. forces conducted strikes on\u00a0Qeshm Island\u00a0in response.<\/p>\n
Diplomatic talks between\u00a0Iran\u00a0and\u00a0the United States\u00a0remain at a stalemate, keeping the market mood somber. The\u00a0dollar\u00a0has tended to rally during flare-ups of the \u2060conflict, \u200cunderpinned by safe-haven demand and the\u00a0U.S.’s lower sensitivity to energy price shocks;the \u2060yen tends to weaken as oil rises, given\u00a0Japan’s\u00a0reliance on imported energy. The yen on Wednesday fell to the closely watched 160 per\u00a0dollar\u00a0level, where authorities have previously intervened. That erased its gains made in the wake of\u00a0Tokyo’s\u00a011.7 trillion yen\u00a0($73 billion) intervention a month ago to shore up \u200cthe ailing currency. “Everybody knows the risks of [Bank of Japan] intervention have increased, but it hasn’t really deterred them,” said\u00a0Marc Chandler, chief market strategist at \u200dBannockburn Global Forex.<\/p>\n
“The intervention, which was a record amount, in late April and May, \u200bpushed us down, and we’re back up there. So whatever the Japanese think they bought, they didn’t buy that much time.” Prime Minister\u00a0Sanae Takaichi\u00a0said later that authorities stood ready to respond to exchange-rate moves as needed. Takaichi’s verbal intervention supported the currency before a speech from\u00a0Bank of Japan Governor Ueda.<\/p>\n
Ueda said the central bank must discuss \u2060the pros and cons of raising interest rates if inflationary risks outweigh downside risks to the economy.<\/p>\n
“Comments from BoJ Gov. Ueda have been hawkish, signaling that \u200cthe policy rate was not in the neutral range,” said\u00a0Shaun Osborne, chief FX \u200cstrategist at\u00a0Scotiabank.<\/p>\n
The\u00a0dollar\u00a0was last a touch stronger on the day at\u00a0159.975 yen.<\/p>\n
Elsewhere, the euro eased 0.24% to\u00a0$1.16, while sterling was down 0.26% at\u00a0$1.3429.<\/p>\n
The prolonged war in the\u00a0Middle East\u00a0and persistently high energy prices have left investors ramping up bets of policy tightening across major central \u2060banks this year, a sea change from the rate cuts that were priced in prior to the conflict.<\/p>\n
Against a \u2060basket of currencies, the\u00a0dollar\u00a0was up 0.161% at 99.455.<\/p>\n