The Japanese yen, after a sharp surge fueled by suspected government intervention, struggled to maintain its ground against the US dollar on Tuesday. Following a notable rebound driven by suspected Tokyo-led intervention, the yen edged down by 0.30% to 156.79 per dollar. Despite this retreat, it remained significantly above its recent 34-year low of 160.245, reached on Monday.
Traders were taken aback as the yen experienced a remarkable recovery of nearly six yen, briefly breaching the 157 mark earlier in Tuesday's session. The suspected intervention by Japanese authorities prompted speculation and volatility in the currency markets.
Meanwhile, in anticipation of the upcoming Federal Reserve meeting, most Asian currencies faced downward pressure, with traders showing a preference for the dollar. The anticipation surrounding the Fed's decision stemmed from recent US inflation readings, which exceeded expectations and fueled speculations of a hawkish stance from the central bank.
The dollar index and dollar index futures both saw gains in Asian trade, reflecting investor positioning ahead of the Fed meeting. Market participants expected the central bank to maintain interest rates but remained vigilant for any hawkish signals, particularly in light of persistent inflationary pressures.
The USDJPY pair, a key indicator of yen strength against the dollar, rose by 0.3% to approximately 156.80 on Tuesday. This increase followed a sharp decline from recent highs above 160, prompting suspicions of Japanese government intervention to support the yen. Traders speculated that the Japanese government's threshold for intervention may be around the USDJPY level of 160.
While Japanese officials remained silent on any intervention, the yen's weakness on Tuesday was also influenced by mixed economic data. Although industrial production exceeded expectations in March, retail sales fell short, signaling subdued consumer spending and inflation outlook.
Throughout April, the yen emerged as the worst-performing currency in Asia, with the USDJPY pair recording a nearly 4% increase. The currency's performance remained under scrutiny amid ongoing market uncertainties and geopolitical tensions.
As the yen's trajectory remains uncertain, market participants closely monitor developments in Japan's economic policy, the Federal Reserve's decisions, and broader geopolitical dynamics impacting currency markets.
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