The dollar slumped below ¥112 in Tokyo trading on Thursday, as risk-averse players bought the yen following a fall in Japanese stock prices.
At 5 p.m., the dollar stood at ¥111.74-76, down from ¥113.66-67 the same time Monday. The euro was at $1.1259-1260, up from $1.1085-1086, and at ¥125.84-84, down from ¥126.01-02.
The greenback traded around ¥112.80 in the early morning, after falling sharply in New York overnight as a U.S. Federal Reserve statement gave rise to a view that the pace of the Fed’s future interest rate hikes will be slower than previously predicted.
While keeping interest rates unchanged at the Federal Open Market Committee meeting, the U.S. central bank revised down its policy rate outlook in the statement issued after the meeting.
The dollar advanced to levels close to ¥113 later in the Tokyo morning hours, in line with a rise in the Nikkei average prompted by the Fed’s dovish statement.
But the dollar failed to extend gains, reflecting persistent uncertainty over an additional interest rate hike by the Fed, market sources said.
After hovering around ¥112.70 around noon, the dollar temporarily tumbled below ¥112 as the Nikkei’s fallback into negative territory prompted investors to purchase the yen as a safe haven currency.
“After the dollar’s topside was limited at levels around ¥113, Tokyo stocks’ retreat led players to liquidate their dollar-long positions,” an official at a foreign exchange brokerage firm said.
The U.S. unit lost further ground in late hours, falling below ¥111.80, due to renewed selling from European players.
Following the closely watched policy meetings of Japanese and U.S. central banks this week, “Japanese exporters also bought the yen, believing the dollar was unlikely to rise further versus the yen due to a lack of fresh incentives ahead of the end of Japan’s current business year” later this month, an official of a major brokerage house said.