The dollar tumbled to two-week lows against the yen on Wednesday after Japan's chief central banker said the yen was "very weak" and unlikely to fall further. The dollar also dropped against the euro, which benefited from a rise in benchmark German 10-year bund yields to more than 1 percent for the first time since September. Bank of Japan Governor Haruhiko Kuroda, speaking to a Japanese lower house committee, rescued the yen from close to last week's 13-year trough of 125.86 per dollar to a high of 122.47 yen. Kuroda said the dollar may not necessarily rise versus the yen if the Federal Reserve raises interest rates as traders may have already priced in the possibility of a rate hike.
Analysts said the comments from Kuroda may slow further declines in the yen and suggested Japan may have started the long process of preparing the market for a time when its economy will need less monetary stimulus. "If the Bank of Japan does not feel the yen should weaken further, that should reduce expectations for policy easing," said currency strategist Brian Daingerfield at RBS Securities in Stamford, Connecticut.
The dollar last stood at 122.62 yen, off 1.3 percent, and was down 0.3 percent against the euro at $1.1312. Hit by the yen's advance and rallying commodity currencies, the dollar slipped to a three-week low against a basket of major currencies of 94.322 and was last off 0.55 percent.
Sterling rose 1 percent to a three-week high against the dollar. As oil prices jumped on a report that US oil production was levelling off after years of sharp increases, commodity currencies such as the Canadian and Australian dollars soared by over 1 percent against their US counterpart. The Canadian dollar hit a three-week high against the US dollar of C$1.2217. The Australian dollar also rose as much as 1 percent to $0.7785. Data released by industry body the American Petroleum Institute (API) showed a much sharper weekly fall in US crude stocks than expected and followed a prediction by the US government that domestic oil production would fall more strongly and for longer than expected.
The dollar's slide since Friday, when unexpectedly robust US jobs numbers spurred a rally, may end when US retail sales data for May are published on Thursday. Forecasters expect a 1.1 percent rise, up from no change in April, according to a Reuters poll.
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