The Japanese yen weakened again as traders became more confident in pushing the currency to lower levels, amid the absence of any signs of intervention by Japanese authorities to support it. However, the risk of a sudden move by Tokyo to buy the yen remained present, limiting the pace of losses.
The yen held above 162 per dollar during Asian trading and stayed close to its weakest level against the British pound since 2007 at around 217.09, after hitting a fresh low in the previous session. The euro also rose to 185.47 yen after gaining 0.5%.
Lee Hardman, senior currency analyst at MUFG, said markets had expected a possible Japanese intervention to support the yen during the U.S. holiday due to thin liquidity, but the absence of any official move helped erase part of the currency’s recent gains. He added that the yen received some support late last week as speculation grew over a possible change in Japan’s intervention strategy, although the currency’s sudden rise at the time was not evidence of official action.
Meanwhile, the dollar came under pressure as market expectations for U.S. interest rate hikes this year declined after jobs data came in much weaker than expected, prompting investors to reduce their bets on tighter monetary policy.
The euro rose to $1.1442, extending its gains, while the British pound climbed to $1.34005, its highest level in more than two weeks. The dollar index held near 100.86 points.
Markets are now pricing in only about 29 basis points of Federal Reserve rate hikes by December, compared with around 38 basis points a week earlier.
Carol Kong, currency strategist at Commonwealth Bank of Australia, said markets may be underestimating the scale of expected monetary tightening. She noted that the bank still expects the rate hike cycle to begin in December, with actual increases likely to be larger than current market pricing suggests.
Investors are now turning their attention to the minutes of the latest Federal Open Market Committee meeting for fresh signals on the path of interest rates, although expectations point to a less clear tone on forward guidance.
In other currency markets, the Australian dollar held steady at $0.6955, while the New Zealand dollar rose 0.02% to $0.5702.
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