THE yen surged against the dollar in early Asian hours on Thursday on what traders suspected was another round of intervention by Japanese authorities to stop a sharp slide in the currency.
The dollar fell sharply to precisely 153 yen from about 157.55 yen for reasons that were not immediately clear, but traders and analysts were quick to say it was likely yen buying directed by Japan’s Ministry of Finance.
The move came in a quiet period for the currency pair, after the US stock market had closed and with the Federal Reserve’s monetary policy meeting ending hours earlier.
“It caught markets off guard because, obviously, it happened in the US session and seemed to be timed with the FOMC to take advantage of a weaker dollar,” said Kyle Rodda, senior financial market analyst at Capital.com in Melbourne.
“The ‘sneak attack’ element really is the MOF looking to punish speculators and send a warning about shorting the yen: Blow them out so they think twice next time.”
When contacted by Reuters, Japan’s vice-finance minister for international affairs, Masato Kanda, who oversees currency policy, said he had no comment on whether Japan had intervened in the market.
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A US Treasury spokesperson declined to comment on the move in the currency pair.
The yen was changing hands at around 155.58 as of 2326 GMT, giving back about half of earlier spike.
Kanda had warned earlier this week that authorities were ready to deal with foreign exchange matters “24 hours” a day. The MOF issues the order to intervene and the Bank of Japan carries out the trades.
The yen also staged a sudden, steep rally on Monday, when Japan markets were shut for a national holiday. From a 34-year trough at 160.245 per dollar, the yen strengthened as far as 154.4.
Money market data the following day suggested Japan’s finance ministry had spent around US$35 billion to prop up the currency on Monday.
The yen remains down about 10 per cent against the dollar this year, despite the Bank of Japan’s decision to raise interest rates for the first time since 2007 in March.
That’s as a still fragile exit from deflation forces Japanese policymakers to go slow on removing monetary stimulus, while a robust US economy and stubborn inflation delay Fed rate cuts.
Fed Chair Jerome Powell said on Wednesday that it was likely to take longer than previously expected to gain the “greater confidence” needed for policy easing.
“As long as there is a huge gulf between US and Japanese rates, the efforts from the Bank of Japan to push against these fundamentals will likely have limited effect,” said James Kniveton, senior corporate FX deal at Convera in Melbourne.
“The market is likely seeing the lower USD/JPY rate when intervention occurs as an opportunity to buy dips rather than a sign of a trend reversal. The Bank of Japan does have a lot of firepower, but currently they are swimming against the tide.” REUTERS
