The dollar slid to a 17-month low against the yen on Thursday, pressured by minutes of the US Federal Reserve's meeting last month that underscored caution about future interest rate hikes. The dollar fell to 109.10 yen at one point, its weakest against its Japanese counterpart since October 2014. The dollar last traded at 109.17 yen, down 0.6 percent on the day.
The euro slid 0.6 percent against the yen to about 124.42 yen. Against the greenback, the euro held steady at $1.1398, not far from a 5-1/2-month high of $1.1438 touched last week. The dollar index, which tracks the greenback against a basket of six major currencies, stood at 94.419 after plumbing 94.239 on Wednesday, its lowest since October last year.
Minutes from the Fed's March 15-16 policy meeting suggested that the central bank appears unlikely to raise interest rates before June due to widespread concern among policymakers over their limited ability to counter the blow of a global economic slowdown. The minutes showed debate over whether they might increase rates in April with "a number" of them arguing that headwinds to growth would probably persist, and many urging caution about raising rates.
"While the minutes confirm that there is a lot of uncertainty in the Committee about the economic outlook, with risks tilted to the downside, it is clear that hikes are on the agenda of each meeting now," analysts at Rabobank said in a note, maintaining their prediction for two hikes this year, most likely in June and December.
"From this point on, it would require a significant deterioration in the US economic outlook for the FOMC participants to remove more hikes from their anticipated trajectory for 2016," they said. In contrast with the Fed, Bank of Japan policymakers will likely debate the possibility of easing further at their April 27-28 meeting, as recently downbeat economic data has failed to reinforce their expectations that a moderate economic recovery would lift inflation towards their 2 percent target, sources familiar with BOJ thinking said.
A decision on whether to ease at the meeting will be a close call, as many BOJ officials are wary of using their limited policy tools again so soon after unveiling their negative interest rate policy on January 29. As the buoyant yen shrugged off the divergent monetary policy outlook, the dollar got no help from Japanese Prime Minister Shinzo Abe's remarks to the Wall Street Journal this week that countries should avoid seeking to weaken their currencies with "arbitrary intervention."
The yen rose despite verbal warnings from Japanese officials against its appreciation. A senior Japanese finance ministry official said on Thursday that recent currency moves have been one-sided and that the ministry would take steps in the market as needed. The market is sceptical about the chances of yen-selling intervention ahead of a G7 summit that Japan is hosting in May, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"It may be tough for Japan's MOF to take the initiative and charge toward intervention," Okagawa said, referring to the ministry of finance, which has jurisdiction over Japan's currency policy. "If the dollar were to suddenly fall below 100 yen, that may justify action to adjust the speed of the moves, but I think that would be a last resort," he added. The Australian dollar eased a tad to $0.7595. The Aussie held on to the bulk of its 0.7 percent gain from Wednesday, supported by firmness in crude oil prices.