On Monday ( Apr 29 ), the yen suddenly rose against the dollar, with traders citing yen-buying intervention by Japanese authorities in an effort to support a relentless decline in the currency to levels last seen more than three decades ago.
The buck fell sharply to 155.01 japanese from as high as 160.245 earlier in the day. According to industry publications, Chinese banks were seen selling cents for yen. It was last collecting 156.21 renminbi.
For weeks, merchants had been waiting for any signs of Tokyo’s currency-related actions to support a dollar that has already lost 1 % against the dollar this year. Despite a historically negative return from negative prices last month, the currency’s plunge to 34-year lows comes as a result of traders ‘ predictions that Japanese rates will stay low for some time.
When questioned about the intervention of Japan’s major money diplomat Masato Kanda, the diplomat declined to comment.
” I wo n’t comment now”, Kanda, the vice finance minister for international affairs, told reporters.
Businesses in the nation were closed for a holiday on Monday, so Japan’s Ministry of Finance was not quickly available for comment.
” The shift has all the marks of an actual BOJ action, and what better time than on a Japanese common holiday”!, said Tony Sycamore, a market analyst in Sydney at IG.
After a meeting next month, Bank of Japan Governor Kazuo Ueda stated in a press conference that economic plan does not directly affect currency rates, but that exchange rate volatility may have a significant impact on the economy.
On Friday, as investors vented their sorrow after the Bank of Japan kept policy options intact and provided some tips on reducing its purchases of Japanese government bonds ( JGB), a move that might have caused a floor under the yen, the renminbi had moved almost 3.5 yen between 158.445 and 154.97.
As US interest rates have risen while Japan’s have remained close to zero, causing the yen to be under pressure, forcing cash out of the yen and into dollars to make what is known as” carry”
Investors are now anticipating a pause in Fed price cuts following a number of shaky US inflation data, and officials, including Chair Jerome Powell, stress that even those plans are based on data, which is just days before the Federal Reserve’s May 1 plan review.
In 2022, Japan intervened three times in the forex market, selling the dollar to the yen first in September and then again in October as the yen slid to 152 to the buck, a 32-year low at the time. Tokyo is estimated to have spent as much as 9.2 trillion yen ( US$ 60.78 billion ) defending the currency.
In a unique warning, the United States, Japan, and South Korea came to an agreement earlier this month to” read carefully” on forex markets, and Tokyo has stepped up its rhetoric against extreme yen movements.
The japanese has also experienced multi-year lows in relation to the euro, the American dollar, and the Chinese yuan.
” Today’s walk, if it represents interference by the government, is improbable to be a one- and- done move”, said Nicholas Chia, Asia micro planner at Standard Chartered Bank in Singapore.
” We can probably anticipate more follow-through from MOF if USD- Japanese increases to 160.” In a sense, the 160- stage represents the soreness level, or novel line in the sand for the government”.