The U.S. dollar rebounded to the mid-113 yen zone Wednesday in Tokyo amid expectations that the gap between Japanese and U.S. interest rates may not shrink drastically soon, but U.S. President Donald Trump’s attack on Japan’s currency policy capped gains.
At , the dollar fetched 113.56-58 yen compared with 112.74-84 yen in New York and 113.52-53 yen in Tokyo at . It moved between 112.65 yen and 113.63 yen during the day, changing hands most frequently at 113.00 yen. The euro was quoted at $1.0781-0782 and 122.43-122.47 yen against $1.0794-0804 and 121.81-91 yen in New York and $1.0699-0700 and 121.46-50 yen in Tokyo late Tuesday afternoon.
After Trump’s remarks accusing Japan of intentionally devaluing its currency briefly sent the yen to a two-month low of 112.08 yen in New York, many traders bought back the dollar amid lingering expectations of additional U.S. rate hikes, dealers said.
“Mr. Trump’s comments have come as a great shock to financial markets, prompting investors to rush to sell the yen,” said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.
But as the Federal Reserve is set to raise interest rates a few times this year, it is “difficult” to continue selling the yen against the dollar aggressively, Sakai added.
The U.S. central bank is scheduled to release its latest policy decision on Wednesday. Analysts also said the Bank of Japan, which has implemented aggressive monetary easing for years to combat chronic deflation, is unlikely to change its current policies even if Trump puts pressure on the central bank to stop them.
“If the BOJ started to taper its monetary stimulus in response to Trump’s criticism, it would mean the BOJ acknowledges that it is a currency manipulator,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.
“The BOJ is expected to carefully explain to Mr. Trump that its monetary easing is aimed at propping up domestic demand to realize 2 percent inflation, not decreasing the value of the yen,” in line with a Group of 20 agreement, Minami added.
On Tuesday, Trump said in a meeting with pharmaceutical company executives in Washington , “You look at what China’s doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market and we sit there like a bunch of dummies.”
Prime Minister Shinzo Abe denied Trump’s accusation, saying it is “not true.”
Tokyowill explain its stance to
Washingtonif necessary, Abe said in a parliamentary session Wednesday, suggesting he may raise the issue during his upcoming meeting with Trump in
the United Stateson .
Some traders have become cautious about boosting their holdings of the dollar, given the significant influence of Trump’s tweets and remarks on financial markets.
“Now it is difficult to buy the dollar as the targets of criticism began to include Japan. Volatile currency movements are likely to continue for the time being,” a broker said. The euro rose against the yen, while remaining almost unchanged versus the dollar.
