Dollar Unsteady as Euro Bounces Back; Yen Stuck at 34-Year Low

The dollar took a hit against the euro and sterling on Wednesday, following strong European activity data and cooling U.S. business growth. The dollar index, which measures the currency against major peers, was flat at 105.64 after a 0.4% slump overnight.

While the euro and sterling saw gains, the yen remained near a 34-year low against the dollar, prompting Japanese officials to issue intervention warnings. The euro held steady at $1.069975 after a 0.45% rally, fueled by robust business activity in the eurozone.

Sterling also benefited from strong data showing British businesses experiencing their fastest growth in nearly a year. Bank of England Chief Economist Huw Pill indicated that interest rate cuts were not imminent, further supporting the pound.

In contrast, U.S. business activity slowed in April, with weaker demand and easing inflation rates. The Federal Reserve may find some relief in the data, with markets pricing in a 73% chance of a rate cut by September.

The Australian dollar reached its highest level since April 15 at $0.64875 ahead of consumer inflation figures. Despite the dollar’s struggles, it briefly hit a 34-year high against the yen at 154.88, prompting concerns of intervention by Japanese officials.

The Bank of Japan is expected to maintain policy settings at its upcoming meeting, despite recent interest rate hikes. Analysts suggest that the yen may not strengthen significantly until the Fed cuts rates in September.