Firm Dollar pressures Yen towards 34-year low, raises intervention speculation

Forex news: A strong Dollar has kept the Japanese Yen hovering near a fresh 34-year low on Tuesday, intensifying concerns among investors about potential intervention as they await key economic reports from the United States and decisions from the Bank of Japan (BOJ) later this week.

The Japanese currency remained subdued after reaching 154.85 Yen against the Dollar on Monday, marking its lowest level since 1990. The stark divergence in interest rates between the United States and Japan has once again come into focus, particularly amidst easing tensions between Iran and Israel.

Investors are closely monitoring the Yen's movement towards the 155.00 level, widely considered a trigger point for intervention by Japanese authorities.

Japan's finance minister indicated on Tuesday that discussions held last week with his US and South Korean counterparts have paved the way for potential action against excessive Yen movements, issuing one of the strongest warnings yet regarding intervention.

Currently, the Yen stands marginally higher at 154.74 per Dollar, buoyed by recent statements from authorities.

However, there are uncertainties regarding whether Tokyo will take action so close to the BOJ's two-day policy meeting scheduled to commence on Thursday.

Market expectations anticipate the BOJ to project inflation remaining around its 2 per cent target for the next three years in new forecasts, signaling a readiness to potentially raise interest rates from their current near-zero levels.

According to Carol Kong, a currency strategist at Commonwealth Bank of Australia, Yen weakness might compel the central bank to adopt a more hawkish stance, potentially bringing forward expectations of another rate hike and lending support to the Yen.

Nevertheless, Kong notes, "USD/JPY is expected to remain elevated in the near term due to broad USD strength, maintaining the possibility of FX intervention."

The Dollar's strength has been evident across various fronts, with gains nearing 5 per cent this year. It is presently trading around 106.10, slightly below the five-month highs reached last week following remarks from Federal Reserve officials and a series of inflation data releases surpassing expectations.

Market sentiment has shifted from anticipating a rate cut in June to pricing in a 46 per cent chance of the Fed's first rate cut starting in September, with November closely behind at 42 per cent, according to the CME FedWatch Tool.

Looking ahead, investors await first-quarter gross domestic product data on Thursday and the personal consumption expenditures (PCE) index, the Fed's preferred measure of inflation, on Friday, to assess the strength of the US economy.

The euro remained mostly unchanged on Tuesday at $1.065575, poised for its most significant monthly decline against the Dollar since January, while the British pound was last trading at $1.23535 after hitting a fresh five-month low against the greenback at $1.2299 on Monday.

As investors analyse global economic indicators, PMI data published across Europe later on Tuesday could provide some relief amidst ongoing market fluctuations.

In other markets, the Australian Dollar rose to a one-week high of $0.6465, while China's yuan slipped to 7.2455 per Dollar, its weakest level since mid-November last year.

In the realm of cryptocurrencies, bitcoin fell 0.23 per cent to $66,386.00, after reaching over a one-week high of $67,267.34 earlier in the session.

(With Reuters inputs.)