NEW YORK- The yen fell against the dollar, giving back a chunk of its sharp gains in the prior session sparked by suspected intervention by Japanese authorities, while US economic data on employment costs boosted the dollar.
The yen weakened 0.88 percent against the greenback at 157.73 per dollar, but was still off its 34-year low of 160.245 hit on Monday when traders say yen-buying intervention by Tokyo drove a strengthening of about five yen.
For the month, the yen is down 4.04 percent against the dollar, on track for its biggest monthly decline since February 2023.
The dollar index gained ground after economic data showed US labor costs increased more than expected in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year that will likely delay a much- anticipated interest rate cut later this year.
“The trend is still higher for dollar/yen, we really have to see either policy divergence sort of converge a bit, have the US bond market catch a more sustainable bid that takes dollar yen further off the highs, maybe produces a couple of weekly lower lows or some change in rhetoric from the BOJ, but I think it has to be the latter,” said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto.
Japanese officials may have spent some 5.5 trillion yen ($35.05 billion) in supporting the currency on Monday, Bank of Japan data suggested on Tuesday.
The Bank of Japan (BOJ) on Tuesday left its plan for monthly bond buying unchanged for May. Japan’s government bond (JGB) investors are looking for clues on the timing of a taper, which will lead to higher, more attractive yields, supporting the yen.
This comes as the Fed begins its two-day monetary policy meeting on Tuesday, where it is widely expected to hold rates at 5.25 percent -5.5 percent , while comments from Chair Jerome Powell will be closely watched for signs of the central bank’s policy path in light of recent data on inflation and the labor market.