The dollar topped ¥103.10 in Tokyo trading Wednesday, following a steep interest rate hike by the Turkish central bank, but its topside was capped by caution over an upcoming policy decision by the U.S. Federal Reserve.
At 5 p.m., the dollar stood at ¥103.12-14, up from ¥102.77-79 at the same time Tuesday. The euro was at $1.3662-3663, little changed from $1.3664-3664, and at ¥140.92-99, up from ¥140.42-45.
The Turkish central bank decided at an emergency policy meeting to lift its key overnight interest rate from 7.75 percent to 12 percent in a bid to protect the value of the national currency.
Currency traders took heart from the unexpectedly sharp rate hike, driving up the dollar to levels close to ¥103.50 in early Tokyo trading soon after the decision was announced.
But after the initial buying ran its course, the U.S. unit drifted in a range between ¥103 and ¥103.50 for the rest of the day, with players taking to the sidelines to see the outcome of the Fed’s two-day Federal Open Market Committee meeting ending Wednesday.
The rate hike in Turkey, which helped ease risk-averse sentiment among global investors, is “not an ultimate solution to all problems, but only an emergency step,” an official at a major trust bank said.
“Given that many emerging economies also have economic problems like Turkey, such as current account deficits and persisting inflation, potential risks will remain intact,” an official at a bank-affiliated think tank said.
As for the FOMC meeting, the consensus view among analysts was that the Fed would carry out another cut of some $10 billion in its monthly bond purchases after downsizing the program from $85 billion to $75 billion last month.