The Dollar stayed firm on Wednesday, recovering some of the losses caused by renewed speculation about Federal Reserve rate cuts this year, whilst the Yen was weaker for the third straight day.

This led Japanese officials to issue a more forceful warning about the impact of the weak currency on the economy.

Traders believe Japanese authorities spent around $60 billion last week to support the Yen after it reached its weakest level in 34 years against the Dollar, around 160 Yen, Reuters reports.

Analysts have suggested that any intervention from Tokyo would provide only temporary relief for the Yen, considering the significant interest rate gap between the US and Japan.

“If we were to see a sudden, sharp move up in Dollar/Yen then I would expect them to step into the market to support the Yen. But if we continue to see a gradual move up, I doubt they'll come in, but there's obviously a risk,” stated Carol Kong, Commonwealth Bank of Australia currency strategist.

At the time of writing the Dollar was up 0.45% against the Yen at 155.375, moving away from the low last week of 151.86.

Investors are paying close attention to the pace and timing of Federal Reserve rate cuts, which are expected to influence the currency market.

The recent data indicating weaker-than-expected US job creation, coupled with an easing bias from the Fed, have solidified expectations that rates will likely be lower by the end of the year.

The Dollar index, measuring the greenback against major peers, gained 0.18% at the time of writing to 105.6, above the one-month low hit last week.

Elsewhere, central banks in Europe have already begun cutting interest rates. The Swiss National Bank reduced rates in March, preceding Wednesday's decision by Sweden's Riksbank. 

The European Central Bank has indicated its intention to reduce rates in June, contingent on the data moving in the right direction, while the Bank of England is gradually paving the way for its first rate cut.

“What we're looking at is a raft of European central banks going over the next few months, whether or not it's June, or August. We've got a near 50% chance of the Fed cutting in September, but I think that's probably the one that could get pushed out,” said XTB research director, Kathleen Brooks.

“For now, and particularly today, the focus is on Europe cutting first and we're seeing that upward pressure on the Dollar.”

The Euro declined 0.12% to $1.074 on Wednesday, whilst Sterling fell 0.3% to $1.2474.