(Updates prices, adds FX table, adds analyst comment in paragraphs 8 and 13)
Currency markets were choppy on Tuesday as the dollar hit a 10-week high against peers and a six-month top versus the yen before retreating after Japanese officials gave their currency a nudge.
Japan will closely watch currency market moves and respond "appropriately" as needed, the country's top currency diplomat said on Tuesday after financial authorities met in response to a weakening in the yen to its softest in six months versus the dollar.
The yen strengthened on news of the meeting, and held onto those gains, with the currency last up 0.46% versus the dollar at 139.80 having earlier risen to 140.93, its highest since November 2022. JPY=EBS
Derek Halpenny, MUFG's head of research, global markets EMEA said the Japanese currency was coming into focus ahead of a possible election, as Japan is a major energy importer, and subsidies for petrol are nearing their end.
"If [Prime Minster] Kishida is looking at a snap election, he wants to be seen to be addressing one source of energy inflation which would be currency depreciation," Halpenny said.
U.S. President Joe Biden and Republican House Speaker Kevin McCarthy on Sunday signed off on an agreement to temporarily suspend the U.S. debt ceiling and cap some federal spending in order to prevent a debt default.
That helped the dollar index =USD , which measures the U.S. currency against six major peers, hit 104.53 in European trading, its highest in 10 weeks. But it then retreated, and was last down 0.201% at 104.080.
"It's been a one-way trade in the dollar all month long, and given the uncertainty around the [U.S. Federal Reserve] and the economic outlook later in the year, some market participants are taking a bit off the table as the month turns," said Adam Button, chief currency analyst at ForexLive.
The debt ceiling deal is set to face its first test in Congress later on Tuesday.
"It seems to be win-win on almost any scenario for the dollar right now," said Jane Foley head of FX strategy at Rabobank.
She said attention was turning to whether the Fed will hike interest rates again, if not in June then possibly in July.
Looking ahead, the market will be closely watching a readout of nonfarm payroll data due on Friday, which could provide key insight into the strength of the U.S. labor market.
"The jobs run has been nothing short of spectacular and we're way overdue for disappointing jobs," said Button.
The euro was last up 0.17% at $1.0723, EUR= , having earlier hit a two-month low, while the pound was last trading at $1.24095, up 0.41% on the day. GBP=D3 .
In crytocurrencies, bitcoin BTC=BTSP last rose 0.12% to $27,783.00 while ethereum ETH=BTSP was up 0.51% at $1,904.06.
======================================================== Currency bid prices at 10:28AM (1428 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 104.0800 104.3100 -0.21% 0.570% +104.5300 +103.8700 Euro/Dollar EUR=EBS $1.0726 $1.0706 +0.18% +0.09% +$1.0747 +$1.0673 Dollar/Yen JPY=EBS 139.8000 140.4300 -0.44% +6.64% +140.9300 +139.5850 Euro/Yen EURJPY= 149.95 150.37 -0.28% +6.87% +150.6200 +149.7600 Dollar/Swiss CHF=EBS 0.9035 0.9045 -0.08% -2.27% +0.9084 +0.9015 Sterling/Dollar GBP=D3 $1.2410 $1.2359 +0.41% +2.61% +$1.2446 +$1.2328 Dollar/Canadian CAD=D3 1.3611 1.3593 +0.13% +0.46% +1.3612 +1.3569 Aussie/Dollar AUD=D3 $0.6521 $0.6539 -0.28% -4.34% +$0.6559 +$0.6503 Euro/Swiss EURCHF= 0.9689 0.9682 +0.07% -2.08% +0.9699 +0.9673 Euro/Sterling EURGBP= 0.8642 0.8667 -0.29% -2.30% +0.8673 +0.8629 NZ NZD=D3 $0.6047 $0.6054 -0.11% -4.76% +$0.6066 +$0.6026 Dollar/DollarDollar/Norway NOK=D3 11.1810 11.1080 +0.69% +13.97% +11.2120 +11.0790 Euro/Norway EURNOK= 11.9886 11.8923 +0.81% +14.25% +12.0407 +11.8687 Dollar/Sweden SEK= 10.8681 10.8055 +0.61% +4.44% +10.8790 +10.7952 Euro/Sweden EURSEK= 11.6529 11.5818 +0.61% +4.51% +11.6644 +11.5803 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
