(Bloomberg) — The yen fluctuated near the closely-watched 145 per dollar level Wednesday after an overnight slide on increased bets of Federal Reserve rate hikes sparked further verbal intervention from Japan.
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Japan’s currency weakened almost 0.3% to 144.96 early in the Asian session before erasing losses to trade little changed around 144.60 following a further warning by the country’s top chief currency official that the government won’t rule out any options in responding to foreign-exchange moves.
A break of 145 would bring 146.78 into play, the level reached before a joint Japan-US intervention to support the yen back in 1998.
“We’re concerned that the recent foreign exchange moves are very sudden,” Masato Kanda told reporters Wednesday. “We’ll monitor the situation with a sense of urgency, and respond appropriately without ruling out any options.”
Japanese authorities have been stepping up verbal warnings as the yen has fallen but these have failed to halt its decline. While Japan’s currency steadied somewhat after BOJ Governor Haruhiko Kuroda expressed concern over rapid yen selling last week, the gain was short-lived.
The timing of Kanda’s comments “is a bit awkward and the impact may be a bit weak, coming amid the broad dollar strength after the strong CPI,” said David Lu, director at NBC Financial Markets Asia in Hong Kong. “It’s difficult to expect dollar-yen to ease back to 140 on verbal intervention in an all-out dollar rise situation.”
Japan’s currency has tumbled more than 20% versus the greenback this year due to widening policy differentials between the two nations. Tuesday’s US inflation data reinforced bets the Fed will raise its benchmark by 75 basis points at this month’s policy meeting, while the BOJ is forecast to keep rates on hold at the end of its September gathering.
Japanese officials’ language on recent yen moves is approaching the wording used before they directly intervened in the currency market in the past.
Still, economists say the chance for intervention is low. While Japan has more firepower in its foreign exchange reserves to prop up the yen than it did in 1998, analysts see little chance of Tokyo being able to turn the tide through intervention without US help.
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“We recently saw a concerted effort from the BOJ, MOF and government to jawbone the yen but with limited success,” said Matt Simpson, senior market analyst at at City Index in Sydney. “Part of that success could be attributed to a weaker dollar. With expectations of higher Fed rates and widening yield differentials in favor of the dollar, it could make further jawboning efforts feel like they’re shouting into the wind.”
(Adds context on possible intervention.)
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Read More:Yen Eyes a Break of 145 as Verbal Intervention Intensifies
2022-09-14 00:42:01