Kevin Buckland, Tetsushi Kajimoto and Gertrude Chavez-Dreyfus
TOKYO/NEW YORK (Reuters) – The yen rose against the dollar in early Asian hours on Thursday in what traders suspected was another round of interventions by Japanese authorities to stem the currency’s sharp decline, with the 160 level seen as a key line. defense
The dollar fell exactly to 153 yen from about 157.55 yen for reasons that were not immediately clear, but traders and analysts were quick to explain it as a dollar sell-off ordered by Japan’s Finance Ministry to prop up a currency languishing at 34-year lows.
The latest move came during a quiet period for the currency pair, following the close of the US stock market and the conclusion of the Federal Reserve’s monetary policy meeting a few hours earlier.
The dollar had already fallen after Fed Chairman Jerome Powell confirmed the central bank was leaning towards cutting interest rates, even if the timing was delayed due to persistent inflation.
“There is no doubt about the Treasury’s intervention,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities, who said officials set the rate at 160 yen to the dollar as a “last line of defense.”
“The intervention this morning is proof that the Japanese authorities will intervene at any time of the day and on any day of the year,” he added. “They will continue to interfere.”
The Bank of Japan’s forecasts for money market cash balances later showed it missed broker expectations by more than 9 trillion yen ($57.96 billion). This suggests intervention of approximately the size that would be a new record, although factors other than foreign exchange intervention could affect the money market balance.
remove advertising
.
Separately, Columbia University academic and former Treasury chief Takatoshi Ito told Reuters it was likely Japanese authorities intervened to make it clear that they considered the 160-yen-per-dollar rate to be their line in the sand.
The yen came under pressure as interest rates in the US rose and remained near zero in Japan, leading to a flow of money out of the yen and into higher-yielding assets.
Pressure has increased since March as expectations for a Fed rate cut have waned, bolstering the yen’s status as a cheap funding currency.
Speaking to Reuters, Japanese Deputy Finance Minister for International Affairs Masato Kanda, who oversees monetary policy, said he had no comment on Japan’s intervention in the market.
A US Treasury spokesman also declined to comment on the movement of the currency pair.
Yellen told Reuters last week that currency intervention is only appropriate in “very rare and exceptional circumstances” when markets are in disarray and excessive volatility.
TESTING
The difficulty of stopping the yen’s fall was evident in the speed with which the currency reversed direction after its run.
As of 1000 GMT, the yen was down 0.5% at 155.23 to the dollar, giving up some of the gains the day before.
And it remains about 10% lower against the dollar this year as the Fed cuts bets on short-term rate cuts, while the Bank of Japan has signaled it will slow down further policy tightening after its first rate hike since 2007. March.
The gap between the two countries’ long-term government bond yields is 376 basis points, helping push the yen to its lowest level since April 1990 to 160.245 per dollar on Monday. Official data earlier this week showed the sharp rebound that followed was fueled by Japanese intervention totaling about $35 billion, close to a record amount. The Treasury has consistently refused to say whether it was behind the move.
remove advertising
.
($1 = 155.2900 yen)