Yen hovers near intervention zone as traders assess Iran war outlook

TOKYO: The yen hovered close to its May low versus the US dollar on Wednesday, near levels that spurred Japanese currency intervention in recent weeks, as traders weighed the risks of a renewed flare-up in the Iran war.

The Australian dollar hovered near its highest since May 15 ahead of consumer price data that could alter the outlook for interest rates, following weaker-than-expected jobs figures last week.

The New Zealand dollar stabilised following a 0.6% slide on Tuesday, with the Reserve Bank widely seen holding rates steady later on Wednesday, although a slim majority of economists polled by Reuters predict at least one hike by end-September.

The safe-haven greenback was steady after edging higher against major peers a day earlier, as US strikes on Iran dented optimism for a near-term end to hostilities and a reopening of the crucial Strait of Hormuz shipping channel.

US Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could “take a few days.”

The yen crept up slightly to 159.20 per dollar early in Asia’s day, but remained close to the 160 level that many market participants view as a red line for intervention to support it.

Bank of Japan Governor Kazuo Ueda struck a somewhat hawkish posture on Wednesday, saying the war-driven oil shock could become persistent in an environment of high inflation expectations and rising wages.

Markets currently lay around 70% odds for a quarter-point hike at the BOJ’s next policy meeting on June 15 to 16.

“While the threat of further intervention and growing bets in favour of a June hike from the Bank of Japan should be supporting the yen, Japan’s high exposure to the energy crisis is keeping the currency under pressure,” and Friday’s Tokyo consumer price data will be closely watched, said Matthew Ryan, head of market strategy at Ebury.

“We doubt that anything will derail a June hike from the BOJ at this stage, although a soft set of figures here could ease bets for tightening beyond then.”

The dollar index, which measures the currency against the yen and five other rivals, was little changed at 99.087 after adding 0.15% on Tuesday.

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