Dollar gains amid Fed rate cut speculations, Japan’s Yen dips

Forex market today: The dollar regained momentum on Wednesday, making modest gains following earlier losses driven by renewed speculations of Federal Reserve rate cuts this year. Meanwhile, the yen weakened, approaching the 155 per dollar level, heightening concerns of potential intervention from Tokyo.

The offshore yuan retreated from a more than three-month high recorded last week, supported by expectations of additional policy stimulus from Beijing to bolster the economy, and was last seen at 7.2247 per dollar.

The yen remained relatively unchanged at 154.75 per dollar, moving away from its recent peak of 151.86 reached last week amid suspected intervention by Japanese authorities to support the declining currency.

Analysts suggested that any intervention by Tokyo would offer only temporary relief for the yen, given the significant interest rate differentials between the U.S. and Japan.

Bank of Japan Governor Kazuo Ueda highlighted the central bank's focus on monitoring the impact of yen movements on inflation in guiding monetary policy. Meanwhile, Finance Minister Shunichi Suzuki reiterated warnings about authorities being prepared to address excessively volatile currency market movements.

Carol Kong, a currency strategist at the Commonwealth Bank of Australia, remarked, "If we were to see a sudden, sharp move up in dollar/yen, then I would expect them to step into the market to support the yen. But if we continue to see a gradual move up, I doubt they'll come in, but there's obviously a risk."

The euro and New Zealand dollar each edged 0.02 per cent lower to $1.0752 and $0.6000, respectively. The greenback, measured against a basket of currencies, remained steady at 105.41, maintaining some distance from the roughly one-month low recorded last week.

Investors remained focused on the pace and timing of potential Fed rate cuts, with recent weaker-than-expected US jobs data and an easing bias from the central bank reinforcing expectations of lower rates by year-end.

Rodrigo Catril, senior FX strategist at National Australia Bank, noted, "The market brushed off comments from Minneapolis Fed President Kashkari, who sits at the hawkish end of the spectrum and is a non-voter this year."

Elsewhere, the sterling dipped 0.08 per cent to $1.2499 ahead of the Bank of England's policy decision on Thursday, where attention will be on the potential timing of rate cuts. Analysts anticipate the central bank to keep the door open for lower interest rates as early as June.

The Australian dollar fell 0.2 per cent to $0.6585, pressured in part by a less hawkish outlook from the Reserve Bank of Australia following its decision to hold interest rates steady on Tuesday.

(With Reuters inputs)