By Samuel Indyk and Rae Wee LONDON, June 3 Underlying dollar strength pushed the Japanese yen back to the key 160 level on Wednesday, prompting verbal warnings from authorities and keeping traders on alert for intervention, as fresh Gulf hostilities bolstered demand for the U.S….
rrency. The U.S. said Iran launched ballistic missiles toward regional neighbours but all failed to hit targets, and that U.S. forces conducted strikes on Qeshm Island in response
Diplomatic talks between Iran and the United States remain at a stalemate, keeping the market mood sombre. The dollar has tended to rally during flare-ups of the conflict, underpinned by safe-haven demand and the U.S.’s lower sensitivity to energy price shocks; the yen tends to weaken as oil rises, given Japan’s reliance on imported energy. The yen on Wednesday fell to the closely watched 160 per dollar level, where authorities have previously intervened.
That erased its gains made in the wake of Tokyo’s 11.7 trillion yen ($73 billion) intervention a month ago to shore up the ailing currency. “The terms of trade shock is the big thing (driving the yen),” said Gustav Helgesson, macro strategist at SEB. “If the Strait of Hormuz were to open, I would expect the weakening pressure on the yen to subside.” Prime Minister Sanae Takaichi said later that authorities stood ready to respond to exchange-rate moves as needed. Takaichi’s verbal intervention supported the currency before a speech from Bank of Japan Governor Ueda. Ueda said the central bank must discuss the pros and cons of raising interest rates if inflationary risks outweigh downside risks to the economy. “Comments from BoJ Gov.