The dollar rebounded strongly Wednesday to recover the 140 yen level it lost a week ago.
With the effects fading from last week’s coordinated intervention by U.S. and Japanese monetary authorities, the dollar rose as high as 141.20 yen before standing at 140.34-37 yen at 5 p.m. in Tokyo, up from 137.74-76 yen late Tuesday.
As expectations fade over Tokyo’s new policy initiative to fix its ailing banking system, the yen could give up further ground, bank officials said.
The June 17 intervention by the U.S. Federal Reserve and the Bank of Japan in overseas markets gave a quick lift to the long-battered yen, sending the dollar plunging below 135 yen Friday. But much of that momentum has faded. The intervention came close on the heels of the dollar’s rise to an eight-year high above 146 yen early last week.
Also hurting the yen Wednesday was a news report that Fitch IBCA, an international rating agency, has warned it may downgrade Japan’s top sovereign credit rating. The rating agency pointed to various difficulties weighing on Japan’s banking system, the report says.
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