The dollar remained on the defensive on Wednesday, after dovish comments from Federal Reserve Chairman Jerome Powell sent U.S. bond yields lower, overshadowing a strong national jobs report.
The euro held steady, helped by a stubbornly high local inflation reading on Tuesday. Sterling held steady ahead of Thursday’s British election.
However, the yen continued to languish near 38-year lows against the dollar, amid growing prospects of a second Donald Trump presidency, which could lead to a rise in long-term Treasury yields.
The dollar index, which measures the currency against the euro, sterling, yen and three other major peers, was little changed at 105.66 at the start of the Asian session, after falling 0.14% in the previous session.
The euro was flat at $1.0749, trading near the top of its range since mid-June.
The pound held at $1.2689, after rising 0.28% on Tuesday.
The yen was at $161.54 per dollar, after slipping to its lowest since December 1986 on Tuesday at $161.745.
Traders remain on alert for another round of Japanese official intervention, after the Bank of Japan and the Finance Ministry spent about 9.8 trillion yen ($60.67 billion) in late April and early May, when the currency tumbled to 160.82 per dollar. Some have speculated that the authorities could act on Thursday, when tight liquidity due to a U.S. holiday would exacerbate market moves.
President Joe Biden’s faltering performance in last month’s debate triggered a surge in long-term Treasury yields, amid heightened risk that Trump could retake the White House, leading to higher tariffs and spending.
Yields have eased this week, however, with Fed chief Powell telling a European Central Bank conference in Sintra, Portugal, on Tuesday that the U.S. economy has made significant progress on inflation, although he added that more encouraging data is needed to start cutting interest rates.
The 10-year Treasury yield fell to 4.4336% in Tokyo hours, after hitting 4.4930% earlier in the week.
The rising odds of a Trump presidency have “moved targets higher for USD/JPY,” said Tony Sycamore, market analyst at IG.
“A Trump presidency would likely lead to higher fiscal deficits, inflation and yields at the mid-to-long end of the US yield curve, counteracting the impact of Fed rate cuts,” he added. “This possibility would likely see the BOJ hold off on its interventions for now.”
U.S. data overnight showed job openings rose in May after falling too far in the previous two months. The much-anticipated monthly payrolls report is due Friday.
Meanwhile, euro zone inflation eased last month, but the crucial services component remained stubbornly high, fueling concerns that domestic price pressures could remain elevated.
Elsewhere, the Australian dollar rose 0.11% to $0.6675, helped by better-than-estimated retail sales data.
China’s yuan hovered near its lowest since mid-November, amid signs that local authorities are willing to tolerate its decline. In offshore trading, the yuan was flat at 7.3077 per dollar, just shy of Tuesday’s low of 7.3094. (1 dollar = 161.5300 yen)
