Yen drives down at same time as Japan steps up its verbal blackmail

(Bloomberg) — The yen remained under pressure after Japan’s chief foreign exchange watchdog warned that the government should be prepared to intervene in foreign exchange markets 24 hours in advance if necessary.

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“If the currency fluctuates too much, it has a negative impact on the national economy,” said Vice Finance Minister Masato Kanda. “In the event of excessive moves based on speculation, we are prepared to take appropriate action.”

Kanda’s comments had minimal impact, with the yen bouncing long-term, hitting just under 160 against the dollar in the pristine New York session and not far from its weakest level in nearly 34 years.

With benchmark interest rates in Japan still slightly above 0, and cuts still not made in the United States, further deterioration is likely as the yen closes the handover gap between the two countries. The yen is marginally higher against its European counterpart, with buying and selling just a fraction higher than the record low of 171.56 as the euro closed in April.

At America’s Vault, strategists led by Shusuke Yamada expect the yen to weaken to 163 against the greenback by September. They see Phase 165 as providing a new “line in the sand” that can put pressure on the Japanese government to encourage foreign funding.

The market is more bullish as warnings of intervention loom. At one point in London trading, the yen rose sharply, rising as much as 0.6% against the dollar before paring its rise. By 4 p.m. in pristine New York, the currency was about 0.1% stronger at 159.64 per dollar.

Elias Haddad, senior market strategist at Brown Brothers Harriman, said good progress in trading in London looked “too shallow for the BOJ to step in”, with a potential intervention zone for the yen around 160 to 165. Keeping up with the greenback.

The yen moved further inside the easy investment range of 160.17 points on April 29, when Japan was believed to have stepped into the market to stem losses. The vast majority of the yen’s gains since that past and the questionable intervention on May 1 have now been lost despite Japan spending record amounts.

Japan said it spent ¥9.8 trillion ($61.3 billion) intervening in foreign exchange markets during the period April 26 to May 29. The government has not specified the dates when Japan’s vaults were ordered to do so, but buying and selling patterns indicate that there were two major rounds of intervention on April 29 and May 1. International reserves data suggest that Japan probably offered treasury funds to assist in investment in that action.

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“We suspect the next round of BOJ intervention is likely to come after USD/JPY triggers buy orders above the late April high of 160.20,” wrote Tony Sycamore, marketplace analyst at IG Australia. He said the yen’s decline toward the dollar’s closing opportunity was due to stronger-than-expected US Purchasing Managers’ Index data and the BOJ’s reluctance to give detailed plans to support bond purchases.

The BOJ may make additional large cutbacks in bond purchases at a later date after examining the outlook of market participants, according to a summary of assessments released Monday, a member of the policy board said at today’s meeting. One member said the BOJ should consider additional adjustment to economic easing as there are threats to inflation.

The year of foreign money attacks may have been impressive to Japanese authorities and it is probably not enough to intervene quickly through this measure. A gauge measuring the dollar-yen’s progress from the lowest level seen over the next 28 days to Monday’s highest level rose to 6.32 yen, some ¥3.7 less than the 10-yen move Kanda had previously reported. Was told “fast”. This implies that the intervention hypothesis will likely become bullish when the forex pair reaches 163.

In the foreign exchange options market, the top class stood on its feet against the dollar to hedge against the yen, while the eastern currency’s decline exceeded 5th, reflecting investors’ expectations that the yen still has room to rise. to weaken.

Meanwhile, forex speculators move to place bearish bets against the yen. Asset managers reserved about 85,600 agreements to bet against the eastern currency in the program ending June 18 – the most on record in Commodity Futures Trading Commission data dating back to 2006.

World governments are in touch with every other person every day on various issues, including currencies, Kanda said. Jaap Valid said the market is paying attention to foreign exchange levels, and there is a strong sense of caution about foreign exchange intervention.

Kanda’s boss, Finance Minister Shunichi Suzuki, outlined Japan’s stance on the yen on Monday. He said the government is closely monitoring the forex movements and will take appropriate action against the forex movements if necessary.

Kanda said that his opposite figures in Washington did not agree with Japan’s intervention. “The most important thing for them is transparency,” he said. Kanda said the decision by the United States to add Japan to its currency watch list will have no impact on Japan’s currency strategy.

–Naomi Tajitsu, Masaki Kondo, Michael G. With support from Wilson, Daisuke Sakai, Alice Atkins, Sujata Rao, Constantine Kourkoulas, and Carter Johnson.

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