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© Reuters. FILE PHOTO: A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Ankur Banerjee and Harry Robertson

SINGAPORE/LONDON (Reuters) – The dollar fell slightly against the yen on Tuesday as markets remained on high alert for signs of Japanese intervention, while the Australian dollar gained after the country’s central bank held interest rates steady.

The greenback was down 0.19% by 0833 GMT to 144.45 yen, after rising 0.27% on Monday.

However, the yen remained close to last week’s almost eight-month low of 145.07 per dollar, which prompted Japan’s Finance Minister Shunichi Suzuki to warn against excessive yen selling.

The Reserve Bank of Australia (RBA) held interest rates steady at 4.10% on Tuesday, saying it wanted more time to assess the impact of past hikes, but warned further tightening might be needed to bring inflation to heel.

The Australian dollar bounced around, but was up 0.13% at 0833 GMT to $0.668.

Markets had leant towards the central bank holding rates steady after inflation eased a little more than expected in May. Economists however were split, with 16 out of 31 polled by Reuters expecting a hike and the rest forecasting the bank would maintain current rates.

Market activity was relatively subdued on Tuesday with U.S. trade closed for the July 4 public holiday. Investors were also waiting for the closely watched U.S. non-farm payrolls employment report due on Friday, which is likely to influence the Federal Reserve’s next decision.

The euro was down 0.13% against the dollar at $1.09, while sterling was roughly flat at $1.269.

The , which tracks the greenback against six major peers, was also little changed at 103.

“It feels like every week will bring something and this week we’re waiting for the U.S. non-farm payrolls,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

Across currency markets, investors also remained on watch for possible intervention by Japanese authorities to stem yen losses.

Earlier on Tuesday, Japan’s top financial diplomat Masato Kanda said that officials were in close contact with U.S. Treasury Secretary Janet Yellen and other overseas authorities almost everyday on currencies and broader financial markets.

“This is sending signals that a coordinated intervention may be coming as yen continues to hover above 144 per dollar,” said Charu Chanana, market strategist at Saxo Markets.

“A coordinated intervention usually has a longer lasting impact on the yen than a unilateral intervention would have.”

Japan bought yen in September, its first foray into the market to boost its currency since 1998, as the Bank of Japan’s pledge to retain ultra-loose policy as long as required drove the yen as low as 145 per dollar. It intervened again in October after the yen plunged to a 32-year low of 151.94.

RBC’s Tan said he thinks the dollar is likely to rise past 150 yen.

“The Bank of Japan is still unwilling yet to move away from the YCC policy, that’s going to result in a higher dollar,” he said, referring to Japan’s yield curve control that keeps bond market rates low.

Tan said such a move would make intervention “more likely than not”.


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