Yen traders eye further official warnings, border opening moves

JAPAN’S FX traders waited to see if a modest rebound in the yen would hold on Monday (Sep 12), amid broad dollar weakness, continued verbal intervention and media reports that border restrictions may ease.

The yen dipped 0.3 per cent Monday after closing up more than 1 per cent Friday and recovering about half of last week’s rapid decline.

Deputy Chief Cabinet Secretary Seiji Kihara said during a TV programme on Sunday that Japan has “to take necessary steps while closely monitoring developments including excessive, one-sided moves in the exchange rate”. His comments came after officials delivered their strongest warning yet on the yen’s slide, including Bank of Japan governor Haruhiko Kuroda.

“Market players have become more wary that Kuroda has joined the warning given his long experience in currency markets including actual intervention,” said Kengo Suzuki, chief market strategist at Mizuho Bank in Tokyo. “Dollar-yen has come to levels to warrant caution as everybody is thinking the pair can’t move the way it did the first part of this year in the second half.”

While an actual intervention in the market to buy yen is still seen as an unlikely option, analysts have pointed to other measures Japan can use to help buoy the currency, including opening borders.

Japan is planning to allow foreign visitors book trips directly and travel freely within the country, relaxing current rules that required them to use a travel agency, broadcaster FNN reported. The government is planning to scrap a 50,000 people-per-day cap on overseas arrivals by October, the Nikkei said on Sunday.

Some investors such as BlueBay Asset Management see the time as ripe to take long positions in the yen, betting Tokyo will be forced into curbing further weakness.

Still, the bearish sentiment towards the yen is strong given the monetary policy and yield divergence between Japan and the US. Asset manager net-short yen positions hit a record last week, while leveraged funds boosted theirs by the most since March, according to the latest data from the Commodity Futures Trading Commission.

The currency has fallen more than 19 per cent this year.

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“We remain comfortable with our bearish yen view even after the latest move,” wrote Goldman Sachs Group strategists including Kamakshya Trivedi in a note Friday. “But we think that the debate around the risks of intervention and a possible monetary policy shift will become increasingly in focus as we hit higher levels,” in dollar-yen. BLOOMBERG