Yen shrugs off tepid bond demand, dollar firms on trade deal hopes
Japan's yen was steady on Wednesday as ructions in the bond market kept the spotlight on the fiscal health of major economies, while the dollar was firm due to upbeat consumer confidence data and hopes for more U.S. trade deals.
The yen was broadly flat against the greenback at 144.28, after dropping 1% on Tuesday following a report by Reuters that Japan will consider trimming issuance of super-long bonds after a sharp rise in yields in recent weeks.
The focus remained on the Japanese bond market, with demand at an auction of the country's longest-tenor bonds on Wednesday falling to the lowest since July.
"Despite the news flow, there does appear to be some certain level of resistance in dollar-yen," Rabobank strategist Jane Foley said, in a sign that the market may not want to see the yen further weaken against the dollar for now.
The yen has gained nearly 9% so far in 2025 due to broad dollar weakness and safe-haven flows as investors flee U.S. assets in the wake of the erratic trade policies under President Donald Trump that have roiled markets.
DATA WATCH
The dollar index, which measures the U.S. currency against six others, was last 0.1% higher at 99.65 but is down 8% for the year as investors look for alternatives to U.S. assets.
The euro was also broadly flat at $1.1331 after dropping 0.5% on Tuesday as a bout of dollar buying swept the markets amid signs of possible trade deals and data showing U.S. consumer confidence in May was much better-than-expected.
Still, new orders for U.S.-manufactured capital goods plunged by the most in six months in April as the flip-flopping tariff salvos take a toll on the economy and businesses, data showed on Tuesday.
"More positive data surprises are needed to rebuild confidence in U.S. growth, and deficit worries aren't disappearing anytime soon," ING FX strategist Francesco Pesole wrote in a note.
"When adding the themes of de-dollarisation and Trump's plans for a weaker dollar in the longer run, we still think the greenback rallies can fade from here."
It is going to be a selective dollar weakening, with the euro and the yen likely being the key beneficiaries, said Sam Lynton-Brown, global head of macro strategy at BNP Paribas, during a call presenting the French bank's global economic outlook.
The dollar was also supported by Trump's decision to delay higher tariffs on the European Union over the weekend.
EU officials have asked the bloc's leading companies and CEOs for details of their U.S. investment plans, two sources familiar with the matter told Reuters, as Brussels prepares to advance trade talks with Washington.
Sterling last bought $1.3488 but stayed close to the three-year high touched on Monday.
Investors will watch out for the April Personal Consumption Expenditure report - the Federal Reserve's preferred inflation gauge - on Friday that could help gauge the impact of Trump's trade policies.
Minutes of the U.S. Federal Reserve's meeting this month will be released later in the day.
The Australian dollar last fetched $0.6438 as data showed consumer inflation held steady in April, leaving hopes for more interest rate cuts mostly intact.
The New Zealand dollar firmed 0.33% to $0.5969 after the country's central bank signalled it might be nearer to an end to easing than some in the market had hoped for as it cut rates by 25 bps as expected.
(Reporting by Ankur Banerjee, Johann M Cherian in Singapore and Linda Pasquini in Gdansk; Editing by Helen Popper, Kirsten Donovan)
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