By Kevin Buckland, Tetsushi Kajimoto and Gertrude Chavez-Dreyfuss
TOKYO/NEW YORK (Reuters) -The yen rose against the dollar in early Asian hours on Thursday after what traders suspected was a new round of intervention by Japanese authorities to halt a sharp decline in the currency , where the 160 level was seen as an important limit. of defense.
The dollar fell from about 157.55 yen to exactly 153 yen for reasons that were not immediately clear, but traders and analysts were quick to attribute this to the selling of dollars ordered by Japan’s Ministry of Finance to support a currency languishing on the lowest level in 34 years.
The latest move came during a quiet period for the currency pair, after the US stock market closed and the Federal Reserve’s monetary policy meeting ended several hours early.
The dollar was already on the back foot after Fed Chairman Jerome Powell confirmed the central bank was targeting interest rate cuts, even if that timing was delayed by persistent inflation.
“There is no doubt that the MOF has intervened,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities, who said officials have set 160 yen per dollar as their “last line of defense.”
“This morning’s intervention is proof that the Japanese authorities will intervene at any time of the day, on any day of the year,” he added. “They will continue to intervene.”
The Bank of Japan’s money market projections for cash balances later showed a discrepancy of more than 9 trillion yen ($57.96 billion) with brokers’ expectations. It suggests an intervention of about that size – which would be a new record – although factors other than currency intervention could also influence money market balances.
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Moreover, Takatoshi Ito, an academic and former director of the Treasury Department at Columbia University, told Reuters it was likely that Japanese authorities intervened to signal that they see 160 yen per dollar as their line in the sand.
The yen is under pressure as US yields have risen and Japan’s have remained near zero, pushing cash out of the yen into higher-yielding assets.
Pressure has increased since March as expectations for Fed rate cuts faded, reinforcing the yen’s status as a cheap financing currency.
When Reuters contacted Japan’s Vice Finance Minister for International Affairs, Masato Kanda, who oversees currency policy, he said he had no comment on whether Japan had intervened in the market.
A US Treasury spokesperson also declined to comment on the currency pair’s move.
Yellen told Reuters last week that currency interventions were only acceptable in “very rare and exceptional circumstances” when markets were in disorder and there was excessive volatility.
CHALLENGING
The difficulty in stopping the yen’s decline is made clear by the speed at which the currency has changed direction from its peak.
As of 1000 GMT, the yen was 0.5% lower at 155.23 per dollar, giving up some of the ground gained overnight.
And this year, yields remain about 10% lower against the dollar, amid declining expectations for near-term Fed rate cuts, while the Bank of Japan has signaled it will move slowly with further policy tightening after the first interest rate increase since 2007 in March.
The difference between long-term government bond yields in the two countries is as much as 376 basis points, helping to push the yen to its weakest since April 1990 at 160.245 per dollar on Monday. Official data earlier this week suggested that a sharp recovery that followed was due to Japanese intervention totaling about $35 billion, near a record amount. The Treasury Department has consistently refused to say whether it was behind the move.
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($1 = 155.2900 yen)
