Yen rises from one-year low after official escalates intervention warning
THE battered yen recovered some ground on Wednesday (Nov 1) on threats of intervention from Japanese authorities.
The US dollar was last down 0.35 per cent at 151.2 yen, after more pointed-than-normal remarks from Japan’s top currency diplomat Masato Kanda.
It hit a one-year high on Tuesday as the yen slid after the Bank of Japan redefined its 1 per cent limit on 10-year government bond yields as a reference rate rather than a hard cap.
The tweak disappointed many investors who had been expecting a stronger move away from ultra-loose monetary policy.
It was not enough to close the wide gap in bond yields between Japan and other countries, that has been responsible for the yen’s almost 14 per cent drop against the US dollar this year.
“The normalisation (in policy) is relatively fast for BOJ standards, but slow relative to what we are seeing in the rest of the world,” said Claudio Irigoyen, global head of economics at Bank of America Global Research.
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The yen traded weaker than 160 per euro for the first time since 2008 on Tuesday, but recovered slightly to 159.44 on Wednesday.
“The market definitely will try to probe for where the red line is for the Ministry of Finance,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“It’s clear that it’s not at 150 (per US dollar) but you don’t want to be out there in front when the Japanese authorities intervene.”
The euro fell 0.17 per cent to US$1.0558 in the wake of Tuesday’s fall in growth and inflation.
“The data shows the (European Central Bank’s) 450 basis points of interest rate hikes ... are working to restrict demand,” said CBA analyst Carol Kong.
The US dollar index, which tracks the greenback against its major peers, rose 0.22 per cent to 106.9.
It has traded sideways since hitting an almost one-year high of 107.34 in early October on the back of a sharp rise US bond yields driven by strong economic growth.
US Treasury plans to sell US$112 billion in its quarterly refunding next week, which will raise US$9.8 billion in new cash and refund US$102.2 billion in securities. This will include US$48 billion in three-year notes, US$40 billion in 10-year notes and US$24 billion in 30-year bonds.
Sterling was down 0.19 per cent at US$1.2132 ahead of the Bank of England’s interest rate decision on Thursday.
The Australian dollar edged up 0.1 per cent to US$0.6342.
Factory activity indicators in China, Japan and South Korea showed activity slowed in October. REUTERS
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