The dollar tumbled to levels close to ¥112 in Tokyo trading on Wednesday as expectations of an early additional rate hike by the U.S. Federal Reserve receded due to dovish remarks by Fed Chair Janet Yellen in her speech overnight.
At 5 p.m., the dollar stood at ¥112.07-07, down from ¥113.68-69 at the same time Tuesday. The euro was at $1.1328-1328, up from $1.1176-1176, and at ¥126.96-97, slightly down from ¥127.06-07.
After falling from around ¥112.75 to around ¥112.40 by midmorning, the U.S. currency saw its downside against the yen supported partly by Japanese importers’ purchases. But the dollar lost ground again in the afternoon as Tokyo stock prices extended losses.
Yellen said in the speech that given risks from slowing global economic growth, “I consider it appropriate for the (central bank’s policy-setting Federal Open Market) Committee to proceed cautiously in adjusting policy.”
The cautious attitude expressed by Yellen was no surprise itself, but the speech had a considerable impact as it followed recent hawkish comments by regional Federal Reserve bank leaders, market sources said.
The Yellen speech “triggered the liquidation of excessively accumulated dollar-long positions,” an official at a major Japanese bank said.
Dollar buyers were also disappointed at the previous day’s evening press conference by Japanese Prime Minister Shinzo Abe, where he gave no indication of postponing the planned consumption tax hike.
With key U.S. jobs data for March to be released on Friday, however, “traders feel uneasy about selling the dollar one-sidedly,” an official at a foreign exchange brokerage house said.