The dollar tumbled against the yen in Asia on Wednesday after the US Federal Reserve indicated it was prepared to take further measures to boost a faltering economic recovery, analysts said.
The dollar fell to 84.80 yen in Tokyo morning trade, down from 85.15 yen in New York late Tuesday, changing hands at the lowest levels since Japan stepped into markets on September 15 to curb the yen’s strength.
The euro rose to 1.3275 dollars from 1.3253 in New York, while holding steady at 112.84 yen.
The US Federal Reserve’s policy-making open market committee on Tuesday set the tone after it said it was prepared to take new stimulus measures if necessary, analysts said. While the Fed left interest rates at record lows, it suggested further credit easing in a statement.
“The committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery,” it said.
Those measures would likely include buying treasury bonds, causing the market to brace for further dollar losses.
The Fed comments will likely keep the dollar weak in the near-term, as the bank’s stance is expected to keep downward pressure on US interest rates, analysts said.
“The dollar is being dumped as the suggested credit easing spawned expectations of lower interest rates” in the United States, said Daisuke Karakama, market economist at Mizuho Corporate Bank. Market players are now waiting to see if Tokyo authorities will again step into foreign exchange markets to further weaken the yen.