The battered yen languished near the 160 per dollar level on Tuesday and kept traders on alert for possible intervention by Japanese authorities to support the currency, while the greenback rose somewhat in the broader market.
Bitcoin suffered losses after posting its worst day in more than two months earlier in the week, partly due to outflows from bitcoin exchange-traded funds (ETFs), analysts said.
The dollar was up 0.04% at 159.64 yen, just shy of the 160 level that pushed Tokyo into a 9.79 trillion yen ($61.33 billion) currency intervention in late April and beginning of May.
The threat of another intervention made traders unwilling to test the key resistance level, leaving the yen in a tight range.
“The market is showing … that it is nervous and very concerned about this situation,” said Chris Weston, head of research at Pepperstone.
“There are inherent risks in being short the Japanese yen now as a carry trade, which is obviously what (the authorities) want to see.”
“The first thing to do is tell currency speculators and people holding carry trades that you are warned: If you hold these positions now, you run the risk of a 400, 500 percentage point drop in the dollar/yen ratio.”
The yen’s latest decline came following the Bank of Japan’s (BOJ) June policy meeting, where policymakers disappointed investors who were betting on an immediate reduction in the BOJ’s massive bond purchases.
Meeting minutes released on Monday showed the central bank discussed the possibility of raising short-term interest rates, with one policymaker calling for an increase “without too much delay.”
In the broader market, the dollar was ahead ahead of Friday’s release of the U.S. Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation.
The pound fell 0.01% to $1.2683, while the Australian dollar fell 0.02% to $0.6655.
The New Zealand dollar slipped 0.04% to $0.6120, not too far from a more than two-week low hit last week.
Politics also took center stage for investors, with the first U.S. presidential debate between President Joe Biden and his predecessor Donald Trump set for Thursday and the French election starting this weekend.
The euro, which has been under pressure from political turmoil in France in the wake of President Emmanuel Macron’s snap election earlier this month, rose 0.01% to $1.0734.
However, the common currency was headed for a monthly loss of around 1%, due to the political turmoil.
Against a basket of currencies, the dollar settled at 105.49.
“Elections in France will begin on June 30, so the euro will be influenced by political concerns,” analysts at Sumitomo Mitsui Banking Corporation said in a note. “If the unstable political situation continues, the euro will weaken further against the USD.”
In cryptocurrencies, bitcoin last rose about 1.5% to $60,349, recovering some of the sharp 6.65% drop seen in the previous session and after hitting a more than one-month low.
“We saw a decline, we saw six days in a row of funds exiting bitcoin cash ETFs,” Pepperstone’s Weston said.
“Bitcoin, to me, is… a momentum vehicle, and momentum works both ways. If it’s going one direction and the rate of change is increasing, to me, you stand back and let it the selling occurs until it can form a base. And right now, the momentum is down.” (1 dollar = 159.6300 yen)
