Dollar Faces Resistance at Key 160 Yen Level; Bitcoin Rebounds
On Tuesday, the dollar struggled to break above the significant 160 yen level as concerns about potential currency intervention by Japanese officials kept the yen somewhat buoyed against its counterparts.
Bitcoin Recovers After Sharp Decline
Bitcoin regained some ground after experiencing its worst day in over two months earlier this week. Analysts attributed the recovery in part to outflows from bitcoin exchange-traded funds (ETFs).
Dollar-Yen Dynamics
The dollar was last seen 0.08% lower at 159.42 yen, trading within a narrow range during the Asian session. Traders were cautious about testing the key resistance level, which had triggered a substantial 9.79 trillion yen ($61.33 billion) intervention by Tokyo in late April and early May. This caution prevented the yen from reaching new lows against other currencies. Sterling remained just below a 16-year high at 202.38 yen, and the Aussie retreated from a 17-year peak, last standing at 106.21 yen.
Chris Weston, head of research at Pepperstone, noted, “The market is showing… that they are nervous, and they are very much on edge about this situation.” He added, “There are inherent risks to being short the Japanese yen now as a carry trade, which is of course what authorities want to see.”
Weston warned currency speculators, “If you hold those positions now, you run the risk of a 400-, 500-pip drop in dollar/yen.”
Bank of Japan’s Impact
The recent decline in the yen followed the Bank of Japan’s (BOJ) June policy meeting, where policymakers disappointed investors hoping for an immediate reduction in the BOJ’s extensive bond purchases. Minutes from the meeting released on Monday showed that the central bank had debated the possibility of a near-term interest rate hike, with one policymaker advocating for an increase “without too much delay.”
Broader Market Movements
The dollar eased slightly ahead of Friday’s release of the U.S. personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure. Sterling edged up 0.09% to $1.2696, the Australian dollar rose 0.1% to $0.6663, and the New Zealand dollar remained steady at $0.6124.
Political Considerations
Political events also weighed on investors’ minds, with the first U.S. presidential debate between President Joe Biden and his predecessor Donald Trump scheduled for Thursday, and French elections set to begin this weekend. The euro, under pressure due to political turmoil in France following President Emmanuel Macron’s unexpected snap election call earlier this month, gained 0.06% to $1.0741. However, the euro was still on track for a monthly loss of approximately 1% due to the political instability.
Against a basket of currencies, the dollar dipped 0.1% to 105.39. Analysts at Sumitomo Mitsui Banking Corporation noted, “France’s election will commence on June 30, hence EUR will be affected by political concerns. If the unstable political situation continues, EUR will weaken further against USD.”
Cryptocurrency Market
In the cryptocurrency market, bitcoin jumped over 3% to $61,319, recovering some of its sharp 6.65% fall from the previous session and hitting a one-month low. Chris Weston from Pepperstone commented, “We’ve seen drawdown, we’ve seen six days in a row of funds coming out of the bitcoin cash ETFs. Bitcoin, for me, is… a momentum vehicle, and momentum works both ways. If it’s going in one direction and the rate of change is picking up, for me, you stand aside and let the selling happen until it can form a base. And right now, the momentum’s to the downside.”
Exchange Rate
At the time of reporting, $1 equaled 159.6300 yen.
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