(Updated at 1500 EDT)
The dollar touched the closely watched 150 level against the yen on Friday, before falling back again, as investors positioned for the Federal Reserve to hold rates higher for longer.
A move above 150 is seen in the market as having the potential to spur an intervention by Japanese monetary officials concerned about the currency weakening too far.
It reached 150.165 on Oct. 3 before quickly dropping back to 147.3, but market participants say it is not clear whether the move resulted from an intervention by the Ministry of Finance (MOF) or was caused by market nerves and trading stop losses or other automated trades being triggered.
"The market is obviously very mindful that the 150 threshold... is a potential precursor for the uncertainty of having the MOF on the other side of it," said Jeremy Stretch, head of G10 currency strategy at CIBC Capital Markets.
Analysts say that the speed and context of the move and how far it goes above 150 will likely influence whether the Ministry of Finance steps in.
The dollar was last up 0.11% on the day against the Japanese currency at 149.85 yen JPY=EBS . The dollar rally has stalled since the index hit a 10-month high on Oct. 3 even as benchmark 10-year Treasury yields continue to hit fresh 16-year highs.
US/ Adam Button, chief currency analyst at ForexLive, said that the potential for MOF intervention was limiting dollar gains.
“I think the dollar would otherwise be stronger if not for the threat of intervention from Japanese monetary officials,” he said. “Given fixed income and equities, the dollar should be stronger than it is this week, and I think it’s just a matter of time until it materializes.”
Some analysts also note that the number of investors holding dollars has become crowded, which may be holding back further rallies.
"The greenback continues to draw smaller benefits from strong U.S. data and high rate advantage than it should, likely due to its overbought status, but upside risks remain predominant," ING analyst Francesco Pesole said in a note on Friday.
The index =USD was last at 106.14, down 0.06% on the day. The euro EUR=EBS rose 0.04% to $1.0593. The dollar eased on Thursday after Fed Chair Jerome Powell said rising market interest rates could reduce the need for action by the central bank.
The odds of a Fed hike in December have dropped to 24%, from 39% before Powell’s comments, while a November pause is seen as a sure thing, according to the CME Group’s Fed Watch Tool. But the U.S. central bank is not expected to begin cutting rates until June.
Investors are also watching the Middle East for any indications of an escalation in the war between Israel and Hamas.
The Swiss franc CHF=EBS hit an almost six-week high against the greenback earlier on Friday, before falling back to last trade at 0.8917. The Swiss currency has been a popular safe haven as a result of rising geopolitical tensions.
The Swissie also hit its highest against the euro EURCHF=EBS since 2015, when the Swiss National Bank scrapped its peg between the two currencies.
Elsewhere, the pound fell to a five-month low against the euro EURGBP=D3 after a series of data releases showed a collapse in British consumer confidence in October following weak retail sales the month before.
Sterling was last up 0.14% against the dollar GBP=D3 at $1.2158.
======================================================== Currency bid prices at 3:00PM (1900 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 106.1400 106.2100 -0.06% 2.561% +106.4200 +106.0600 Euro/Dollar EUR=EBS $1.0593 $1.0582 +0.11% -1.13% +$1.0604 +$1.0565 Dollar/Yen JPY=EBS 149.8500 149.7900 +0.04% +14.29% +149.9900 +149.6000 Euro/Yen EURJPY= 158.73 158.51 +0.14% +13.14% +158.9200 +158.3500 Dollar/Swiss CHF=EBS 0.8917 0.8917 +0.04% -3.53% +0.8935 +0.8902 Sterling/Dollar GBP=D3 $1.2158 $1.2139 +0.14% +0.51% +$1.2170 +$1.2094 Dollar/Canadian CAD=D3 1.3701 1.3721 -0.14% +1.12% +1.3734 +1.3670 Aussie/Dollar AUD=D3 $0.6315 $0.6329 -0.21% -7.35% +$0.6329 +$0.6298 Euro/Swiss EURCHF= 0.9444 0.9430 +0.15% -4.56% +0.9454 +0.9418 Euro/Sterling EURGBP= 0.8711 0.8714 -0.03% -1.50% +0.8740 +0.8709 NZ NZD=D3 $0.5824 $0.5850 -0.43% -8.27% +$0.5850 +$0.5818 Dollar/DollarDollar/Norway NOK=D3 11.0500 11.0090 +0.42% +12.65% +11.0740 +11.0180 Euro/Norway EURNOK= 11.7106 11.6345 +0.65% +11.60% +11.7284 +11.6229 Dollar/Sweden SEK= 10.9720 10.9594 +0.31% +5.42% +11.0165 +10.9516 Euro/Sweden EURSEK= 11.6239 11.5883 +0.31% +4.25% +11.6439 +11.5874
