LONDON (Reuters) -The yen briefly jumped against the dollar on Friday, putting traders on alert for signs of new intervention by Japanese authorities, who likely stepped in the day before to prop up a currency that is still close to a 38-year low.
The dollar fell as much as 1% to a one-month low of 157.30 yen, but pared some of these losses and fell 0.55% to 158.01 yen. The euro last fell 0.2% to 172.28 yen.
Japan’s top currency diplomat Masato Kanda declined to say whether there has been any forex market intervention or interest rate control, Jiji Press reported on Friday. He did say that the fact that there was a one-sided, speculative movement in exchange rate movements could not be ignored.
Japan’s Finance Ministry and the New York Federal Reserve were not immediately available for comment from Reuters.
Daily operating data earlier in the day showed the Bank of Japan (BOJ) may have spent more than 3 trillion yen ($18.85 billion) on defending the currency on Thursday, less than three months after it last intervened .
It was not immediately clear what was behind this latest move. Several analysts noted that the rate showed some hallmarks of official purchases, but the yen’s strengthening was more modest than Thursday’s, raising some doubts about whether or not the central bank was behind the trend.
“It could be a modest further round of intervention. I wouldn’t be as confident as I was yesterday when the move was much bigger,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.
“Considering that we have the Japanese holiday on Monday, it is not a bad time for them (Japanese authorities) to enforce the measure.
“It’s not the biggest move in the yen yet, so I wouldn’t be too sure it’s them,” he added.
NO BREAK FOR THE YEN
Some analysts said the yen’s brief bounce could be the result of the BOJ checking exchange rates at dealers – often a precursor to a purchase.
The news source said earlier on Friday that the BOJ had implemented interest rate controls on the euro/yen currency pair during Asian trading hours.
With the Japanese currency near its weakest since the mid-1980s, chances of another round of buying by the BOJ remain high and Monday’s bank holiday in Japan, when market liquidity is likely to be much thinner, could provide a way out offer, analysts said.
“They need to change tactics to keep the market on their toes and show they mean business,” said James Malcolm, head of FX strategy at UBS.
A softer reading of US inflation on Thursday helped increase the chances of a Federal Reserve rate cut in September, which could take some pressure off the yen by making it less attractive for investors to trade the big difference between US and Japanese interest rates.
“I wouldn’t be surprised if it was the BOJ that went for a 1-2 punch strategy. Liquidity is probably not great, so it’s a good time, and (Fed Chairman) Jerome Powell’s speech on Monday could help things. said Kenneth Broux, head of corporate research FX and rates at Societe Generale (OTC:).
Fed Chairman Jerome Powell will take part in an interview on Monday organized by the Economic Club of Washington, in which he could give a signal on whether a rate cut could happen in September.
($1 = 159.1200 yen)
