Dollar Down To 128 Yen On Speculation About Fed Rate Hike

The US dollar dropped to the lower 128 yen range in Tokyo Thursday, briefly falling about 2 yen from the previous day, after remarks by Federal Reserve Chair Jerome Powell fueled speculation the interest rate hike cycle in the US is nearing its end, Kyodo News reported.

Photo Insert: At noon, the dollar fetched 128.52-53 yen compared with 128.88-98 yen in New York and 130.17-18 yen in Tokyo at 5 p.m. Wednesday.

The Fed on Wednesday further slowed the pace of interest rate hikes, deciding on a 0.25 percentage point increase, a smaller increment than the 0.5-point hike in December. Rates were lifted by 0.75-point in each of the four preceding meetings.

While the rate decision matched market expectations, investors were caught off guard when Powell unexpectedly acknowledged a "disinflationary process" has started, triggering dollar selling on the view the Fed may be ready to halt its rate hikes in the near future, analysts said.

"Investors had expected a more hawkish tone from Powell, thinking he would warn against market moves that had priced in rate cuts later this year," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.

"But he didn't take an overly critical stance against such moves," which caused the dollar to fall sharply against the yen, he said.

The US central bank will likely decide on another rate increase in March but could pause its rate hikes as early as May, judging from the tone of Powell's speech, analysts said.

At noon, the dollar fetched 128.52-53 yen compared with 128.88-98 yen in New York and 130.17-18 yen in Tokyo at 5 p.m. Wednesday.

The euro was quoted at $1.1017-1021 and 141.59-65 yen against $1.0985-0995 and 141.64-74 yen in New York and $1.0880-0882 and 141.63-67 yen in Tokyo late Wednesday afternoon.

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