The dollar was close to recent highs on Thursday as markets raised bets that the Federal Reserve is expected to do more in its aggressive tightening series to tame smoldering inflation, while wariness of intervention kept the yen steady.
The Japanese currency was trading at 143.02 in Asia after a jump on Wednesday as the country’s central bank checked exchange rates at banks – a possible preparation for buying the yen.
Japan’s record trade deficit in August, however, highlighted both the bearish yen and some of the effects of its 25% fall this year on the economy.
“The direction of the yen is still for further weakening… If they really want to stop the weakening, then a policy change by the Bank of Japan is the recipe,” said Rodrigo Catril, currency strategist at National Australia Bank.
“Our view is that the intervention will certainly spook speculators on the day, but it is unlikely to last much longer.”
The kiwi jumped 0.2% to $0.6012 as official data showed gross domestic product (GDP) rose 1.7% in the June quarter, beating forecasts for a 1.0% rise.
Sterling was down 0.05% at $1.1536, while the euro was down 0.06% at $0.9972 – both further losses after an inflation surprise sent the greenback higher on Tuesday.
The euro got some help from European Central Bank policymaker Francois Villeroy de Gaulle, who said on Wednesday that the bank’s neutral rate, estimated to be below or close to 2% in nominal terms, could be reached by the end of the year.
However, the dollar is the main focus ahead of the Fed meeting next week.
Fed funds futures estimate a 37% chance that the Fed will raise rates by 100 basis points.
“The market is in consolidation mode,” NAB’s Cutril said. “It’s clear at the front end of the US Treasury curve that the market is getting a little more emboldened to the reality that the Fed will remain hawkish.”
U.S. producer prices fell for a second month in a row in August as gasoline prices fell further, data showed on Wednesday, although that seemed like cold comfort after Tuesday’s data already dashed hopes for cooling consumer prices.
The Aussie was slightly lower at $0.6747 ahead of the 01:30 GMT jobs report.
The U.S. dollar index, which measures the greenback against a basket of currencies, rose 0.09% to 109.7, not far from its two-decade peak of 110.79.
