Tuesday, May 10, 2016

Dollar Strengthens as Japan Warns of Forex Intervention

The dollar rose against the yen Tuesday, after Japan's finance ministry warned that it was ready to intervene if the country's currency continued to strengthen.

The dollar was recently up 0.7% at ¥109.03. The Wall Street Journal Dollar Index, which measures the buck against a basket of 16 currencies, was unchanged at 86.54.

A teller counts Japanese yen to exchange them into U.S. dollars at a foreign exchange booth at a business district in Tokyo. ENLARGE
A teller counts Japanese yen to exchange them into U.S. dollars at a foreign exchange booth at a business district in Tokyo. Photo: Reuters

Japanese finance minister Taro Aso said Monday[2] he was "prepared to undertake intervention" in the foreign exchange market if the yen rose further, the latest official to warn that the country won't tolerate an excessively strong currency.

At the same time, Federal Reserve officials have their stepped up hawkish rhetoric in recent days, helping the dollar move higher. On Friday, St. Louis President James Bullard[3] warned that the very slow pace of U.S. rate increases[4] seen by financial markets is likely at odds with what the central bank could deliver. Higher rates are a boon to the dollar, as they make the currency more attractive to yield-seeking investors.

The recent comments "show that the possibility of the Fed acting this year is a less-far-fetched idea than it seemed," said Joe Manimbo, a senior market analyst at Western Union[5]. WU 1.00 % [6]

The dollar fell against the currencies of commodity producers, as oil prices rose. The U.S. currency was recently down 1,1% against the Brazilian real at 3.4774. It gave up 0.7% against the Mexican peso, to 18.07.

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com[7]

References

  1. ^ 0 COMMENTS (www.wsj.com)
  2. ^ said Monday (www.wsj.com)
  3. ^ James Bullard (topics.wsj.com)
  4. ^ very slow pace of U.S. rate increases (www.wsj.com)
  5. ^ Western Union (quotes.wsj.com)
  6. ^ WU 1.00 % (quotes.wsj.com)
  7. ^ ira.iosebashvili@wsj.com (www.wsj.com)

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