The Japanese yen rose in the European market on Wednesday against a basket of major and minor currencies, as it attempted to recover from its lowest level in three weeks against the US dollar, and was on track to achieve its first gain in the last three sessions, with buying activity from low levels, and amid increasing likelihood of monetary authorities in Japan and the United States intervening again in the foreign exchange market.
The yield on 10-year US Treasury bonds continues to decline, putting downward pressure on the US dollar exchange rate, ahead of the release of the minutes from the Federal Reserve's latest meeting later today.
Price overview
Today's Japanese yen exchange rate: The dollar fell against the yen by 0.2% to 159.29 yen, from today's opening price of 159.60 yen, and recorded a high of 159.65 yen.
The yen ended Tuesday's trading down 0.1% against the dollar, its second consecutive daily loss, hitting a three-week low of 159.78 yen, due to concerns over renewed military tensions between the United States and Iran.
Monetary authorities
Monetary authorities in Japan and the United States are closely monitoring the movements of the Japanese currency in the foreign exchange market, especially as the yen approaches trading again below the pivotal barrier of 160 yen to the dollar.
The yen recorded its biggest weekly loss in three months last week, as the impact of Japanese and American intervention in the foreign exchange market faded, prompting traders to speculate that another round of official purchases would be necessary to halt the current decline in the currency's levels.
The Japanese currency lost about half of the gains it had made thanks to intervention by Japan and the United States in the foreign exchange market in late July and early August.
US dollar
The dollar index fell 0.15% on Wednesday, resuming losses that had paused briefly the previous day, reflecting a renewed decline in the US currency against a basket of global currencies.
This decline comes as investors shift their focus to assessing the future path of US interest rates, especially after the likelihood of a rate hike this year decreased, following data showing that US inflation slowed to levels below market expectations, coinciding with worrying indicators about a slowdown in the US labor market.
US Treasury yield
The yield on 10-year US Treasury bonds fell by more than 0.5% on Wednesday, extending its losses for the second consecutive session, which puts further negative pressure on the US dollar exchange rate.
This development in the US bond market comes ahead of the release of the minutes from the Federal Reserve's latest meeting later today, which are expected to contain clearer clues about the likelihood of US interest rate hikes this year.
Japanese interest rate
The pricing in the probability of the Bank of Japan raising interest rates by a quarter of a percentage point at its September meeting is currently settling at around 80%.
In order to reprice those probabilities, investors are awaiting further data on inflation, unemployment and wage levels in Japan.
Predictions regarding the performance of the Japanese yen
Here at FX News Today, we expect the yen to continue moving in positive territory against the US dollar, thanks to buying activity from low levels and increasing speculation about new government intervention in the foreign exchange market.
All eyes are on the minutes of the Federal Reserve meeting, which, if they contain less hawkish comments than expected by the markets, could reduce the likelihood of a US interest rate hike this year, potentially leading to a further decline in the US dollar against the Japanese yen.
