The yen fell sharply from its highest level in nearly two weeks on Friday as the Bank of Japan is likely to maintain its ultra-loose policy, defying aggressive tightening pressure from peers including the Federal Reserve. and the Swiss National Bank.
The dollar rebounded from a one-week low against its major peers, following a two-day decline following the Federal Reserve’s mid-week rate hike which, although the largest since 1995, did not not exceeded market expectations.
The dollar index, which measures the currency against six peers including the yen, rose 0.16% to 104.05, slipping to the lowest since June 10 at 103.41 overnight. It was at a two-decade high of 105.79 before the Fed’s decision.
The greenback jumped 0.82% to 133.235 yen after falling overnight to 131.49 for the first time since June 6.
Long-term U.S. yields, which are closely correlated to the dollar-yen rate, rose in Tokyo, after falling sharply during U.S. hours as investors feared aggressive Fed tightening could trigger a recession.
On Wednesday, Fed Chairman Jerome Powell said a 75 basis point hike seemed like the appropriate policy move for this meeting, but it would not be the norm. Even so, another increase of the same magnitude is also widely expected for next month’s meeting.
“Slippage in US yields and recession talk has undermined the DXY over the past two days,” Westpac analysts wrote in a client note, referring to the dollar index. “The DXY slide may extend to 102 in the near term, but the broader uptrend is not over, not with another 75 basis point Fed hike on the table in July.”
The dollar rebounded 0.3% to 0.96905 Swiss francs, having fallen the most in seven years overnight as the Swiss National Bank surprised with a half-point rise.
The pound slid 0.27% to $1.2318, returning a fraction of its 1.43% jump overnight, as the Bank of England moved to raise rates again, albeit less than what many in the market had expected, but gave hawkish signals about future policy action.
The euro slipped 0.17% to $1.0537, after hitting a one-week high from overnight, as it gained support from the European Central Bank’s midweek decision on new support to contain borrowing costs among countries in the South.
Elsewhere, the risk-sensitive Australian dollar fell 0.26% to $0.70275 as Asian stock markets followed Wall Street lower.
Bitcoin, the leading cryptocurrency, continued to languish near a year-and-a-half low of $20,079.72 hit this week, last changing hands at $20,500.00.