The dollar held steady on Wednesday as the yen remained near 34-year lows. Federal Reserve officials, including Chair Jerome Powell, suggested US interest rates will stay higher for longer.
Top Fed officials backed away from providing guidance on when interest rates may be cut, emphasizing the need for a prolonged period of restrictive monetary policy. This dashed investor hopes for significant easing this year.
The comments follow data releases highlighting the strength of the US economy and persistent inflation. The dollar remained steady, with the euro at $1.062 in Asian hours.
Powell's comments further squashed expectations of the Fed cutting rates in the near term. Markets are now pricing in September as the new starting point of the easing cycle, pushing back from June.
The revival of the higher-for-longer narrative for US rates has helped push yields higher. The benchmark 10-year Treasury yields climbed to a five-month high of 4.696 per cent on Tuesday.
The yen, which is extremely sensitive to US yields, has been stuck at levels last seen in 1990. The currency is inching closer to the 155 per dollar level that traders worry might result in intervention by Japanese authorities.
"I think dollar/yen will look above the 155 level fairly soon," said Kieran Williams, head of Asia FX at InTouch Capital Markets.
In other currencies, sterling was last at $1.2425, up 0.01 per cent on the day but remained close to the five-month low of $1.24055 it touched on Tuesday. The Australian dollar rose 0.12 per cent to $0.641, while the New Zealand dollar rose 0.22 to $0.589. Data showed New Zealand's consumer prices rose in line with forecasts in the first quarter but domestically driven inflation remained surprisingly strong, prompting markets to push back the expected start of interest rate cuts.