BY COMFORT OGBONNA
Global currency markets steadied on Wednesday as investors assessed the outlook for the Japanese yen following recent government intervention and renewed support from U.S. officials, while the dollar remained near a six-week low as optimism over developments in the Middle East weighed on demand for safe-haven assets.
The Japanese yen strengthened slightly to 157.61 per dollar after weakening about 0.4% in the previous session from Monday’s high of 155.20. The currency remained significantly stronger than recent levels near 164 per dollar, which marked its weakest point in roughly four decades.
Market attention has remained focused on efforts by Japanese authorities to slow the yen’s decline. U.S. Treasury Secretary Scott Bessent said Washington would provide strong support for Japan’s efforts to stabilize its currency, following coordinated action by U.S. and Japanese officials that targeted speculative trading against the yen.
Despite the recent moves, investors remain cautious about whether government intervention will create a lasting change in the currency’s direction. Many analysts believe intervention may only slow further declines rather than reverse the yen’s broader weakness unless supported by changes in Japan’s monetary policy.
Expectations have increased that the Bank of Japan could raise interest rates at its upcoming policy meeting in September after comments from Bessent expressing confidence in Governor Kazuo Ueda’s approach to managing the economy.
Analysts said a continued normalization of Japanese monetary policy will likely be important for strengthening the yen over the longer term. The currency could remain within a range of about 155 to 160 per dollar in the near term as investors turn their attention to upcoming policy decisions from both the Bank of Japan and the U.S. Federal Reserve.
The U.S. dollar index, which measures the currency against a basket of major global currencies, was little changed at 99.85 after reaching its lowest level in six weeks earlier in the week.
The euro remained steady at $1.1533, while the British pound traded around $1.3453. The New Zealand dollar weakened about 0.4% to $0.5870 after data showed the country’s unemployment rate rose to a decade-high of 5.6% during the second quarter. The Australian dollar was largely unchanged at $0.7046.
Falling oil prices also influenced currency markets, reducing inflation concerns and lowering demand for the dollar as a safe-haven asset. Brent crude futures declined further, reaching their lowest level in three weeks as investors responded to signs that diplomatic efforts surrounding the Iran conflict could reduce concerns about potential disruptions to global energy supplies.
U.S. President Donald Trump said recent discussions with Iran had been productive, while diplomatic efforts continued to seek an agreement that could ease tensions and potentially bring an end to the prolonged conflict.
The decline in oil prices also affected expectations for U.S. interest rates. U.S. Treasury yields moved lower, with two-year note yields trading near two-week lows as investors reduced expectations that the Federal Reserve would raise interest rates at its September meeting.
However, some Federal Reserve officials continued to signal concern about inflation. Kansas City Federal Reserve President Jeff Schmid said additional policy restraint may still be needed to bring inflation down toward the central bank’s 2% target.
Investors are now turning their focus to upcoming U.S. labor market data, including the monthly jobs report, which could provide further clues about the Federal Reserve’s next steps on interest rates.
Market expectations for a September rate increase have declined, with the probability of a hike falling to about 56.9% from 67.2% a day earlier, according to market pricing data. Traders are closely watching economic indicators for signs of whether inflation pressures are easing enough to allow the Federal Reserve to maintain or adjust its current policy approach.
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