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Data
released on Tuesday showed U.S. consumer confidence dipped while
a survey on business activity in U.S. Midwest also underwhelmed.
That did not bode well for the Institute of Supply Management's
manufacturing survey due later in the day, with traders saying
that a weak reading could see chances of a June rate hike recede
further.
According to CME Group FedWatch program, investors are pricing
only a 22.5 percent probability of a rate move in June, down
from around 32 percent factored in earlier in the week. Subdued
risk sentiment and worries about whether Britain will vote to
stay in the European Union or not later this month also buoyed
the safe-haven yen. [GBP/]
The dollar fell 1.1 percent to 109.45 yen <JPY=>, weakening from
Monday's peak of 111.455 yen, which had been the greenback's
strongest level since late April.
The yen's rise came on a day when Japanese Prime Minister Shinzo
Abe announced a delay to a scheduled sales tax hike and flagged
risks to global growth.
"There is some position adjustment taking place with the delay
in the sales tax hike almost priced in by investors," said
Yujiro Goto, currency strategist at Nomura. "Also for the
dollar, the soft data is weighing and if the ISM manufacturing
survey is below expectations, then we could see it having a
negative impact on dollar/yen."
Against a basket of six major currencies, the dollar fell 0.2
percent to 95.70, pulling away from a two-month high of 95.968
set on Monday.
The euro was 0.3 percent higher against the dollar, but nearly 1
percent lower against the yen at 122.135 yen.
"A delay of the tax hike was expected to see the yen weaker on
the argument that fiscal irresponsibility should weaken the
currency," said John Hardy, chief currency strategist at Saxo
Bank.
"But that was not the case as the overwhelming fear driving the
yen back stronger is perhaps that the Bank of Japan is firing
blanks with its current policy tools and the yen will only go
higher if global risk appetite weakens."
Meanwhile, the Australian dollar pushed higher after the
country's first-quarter growth exceeded market forecasts and
prompted investors to scale back expectations for the Reserve
Bank of Australia to lower rates soon.
The Aussie dollar rose to $0.7300, pulling away from a 2-1/2
month low of $0.7145 set last week. The currency last traded at
$0.7255, up 0.3 percent.
(Additional reporting by Masayuki Kitano; editing by Richard
Balmforth)
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