Dollar: Dollar holds firm, yen hovers around 32-year low

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The dollar took a breather on Friday after a volatile overnight session as searing US inflation data pointed to more aggressive interest rate hikes, while traders were nervous about intervention as the yen was wallowing near a three-decade low.

The dollar index was little changed after falling 0.5% in the previous session as investors digested data showing US consumer prices rose more than expected in September.

The temporary dip in the dollar was partly due to the strong rally in Wall Street stocks, said Carol Kong, strategist at Commonwealth Bank of Australia.

Wall Street indices staged a dramatic rally, closing sharply higher after an earlier selloff on Thursday as investors rushed into riskier bets.

However, the investment climate remained cautious overall, which should continue to support the dollar.

“I doubt the weaker dollar will hold … the dollar is the safe haven currency right now,” Kong said.

The focus is now on next month’s Federal Reserve monetary policy meeting, where it is expected to deliver another 75 basis point (bp) rate hike.

The dollar was trading at 147.43 to the yen, not far from the 32-year high of 147.665 it hit in the previous session.

Investors remained on the lookout for government intervention to support the fragile currency. Japanese Finance Minister Shunichi Suzuki reiterated the government’s willingness to take “appropriate measures” against excessive currency volatility.

Last month, Japan stepped in to buy the yen for the first time since 1998, in an attempt to shore up the struggling currency.

Rodrigo Catril, currency strategist at the National Bank of Australia, said any intervention from here will focus on the speed of depreciation rather than a specific level.

Meanwhile, the pound last traded at $1.1309, down 0.18% on the day, reversing earlier steep gains against the dollar following reports of a possible reversal of the British government on its budgetary plans.

The Australian dollar rose 0.22% against the greenback at $0.631, coming off a two-and-a-half-year low it hit in the previous session.

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