LONDON—The U.S. dollar touched a more than seven-month high against the Japanese yen on Thursday after their respective central banks reaffirmed divergent policy plans, while Sweden’s crown hit a record low after the Riksbank modestly raised its policy rate.
Federal Reserve Chair Jerome Powell—speaking on a panel with Bank of Japan Governor Kazuo Ueda on Wednesday—noted that two rate rises were likely this year, and did not rule out the possibility of a hike in July.
By contrast, Ueda reiterated that “there’s still some distance to go” in sustainably achieving 2 percent inflation accompanied by sufficient wage growth, the conditions the BOJ has set for considering an exit from ultra-easy stimulus.
The dollar’s surge of as much as 11.6 percent since late March to reach 144.71 yen for the first time since Nov. 10 has prompted increased verbal warnings from Japanese government officials that the move may have been too rapid.
The ministry of finance and BOJ intervened in the currency market last autumn when the dollar strengthened beyond 145 yen.
The dollar was last down 0.2 percent at 144.22.
“The playbook of verbal intervention is consistent with intervention happening soon and if it gets above 145 we could quite easily get to see them intervene again,” said ING global head of markets Chris Turner.
“Last year they were bailed out by U.S. rates, inflation and the dollar all turning lower but this time around there’s a risk they might get sucked into a longer campaign if inflation proves sticky.”
The U.S. dollar index—which measures the currency against six major peers, including the yen—was flat at 102.92.
Sweden’s crown hit a record low of 11.829 per euro after the central bank raised its interest rate and increased its pace of bond sales, or quantitative tightening (QT). It was last at 11.788 per euro, down 0.2 percent.
“They’re expressing confidence that a faster rate of QT is going to deliver a stronger crown and I think that’s a bit unproven,” ING’s Turner said.
“One of the arguments of providing government bonds back to the open market is that they can improve liquidity and deliver higher bond yields but the crown hasn’t really bought into that just yet.”
The euro was up 0.1 percent at $1.0921, after mixed inflation data from German states and Spain ahead of tomorrow’s euro area wide figure.
Consumer prices in North Rhine Westphalia, Germany’s most populous state, rose 6.2 percent on an annual basis in June, up from 5.7 percent in May, and a similar pattern was observed in other states.
Meanwhile, Spain’s 12-month inflation fell to 1.9 percent, the lowest since March 2021 but above the 1.7 percent expected by economists polled by Reuters.
China’s yuan weakened toward a seven-month trough despite the People’s Bank of China setting a stronger than expected official rate, in the latest signal of discomfort at the pace of recent declines.
The dollar added 0.1 percent to 7.2492 yuan in the offshore market, taking it close to the previous day’s 7–1/2-month low of 7.2694.
Elsewhere, the Australian dollar rose 0.4 percent to $0.6632 after stronger than expected retail sales data.
The Russian rouble weakened past 87 against the dollar to a 15-month low, hampered by domestic political risk concerns after an aborted mutiny over the weekend.
