Currency markets steady after yen breaches 2023 low

GLOBAL currency markets steadied on Monday (Aug 14) after the yen hit its lowest level since November, leaving traders on the lookout for Japanese government intervention to shore up the currency.

The US dollar hit a one-month high against a basket of other major currencies as investors sought a safe haven on concerns about China’s economy, but then eased.

Japan’s currency weakened to as low as 145.22 per US dollar in early Asian hours, its lowest since Nov 10, before quickly reversing course in a volatile start to the week. The US dollar last fetched 144.96 yen, flat on the day.

The Bank of Japan has stuck to its ultra-loose monetary policy while other global central banks have hiked interest rates, making returns in other countries look more attractive and weighing heavily on the yen.

Japan intervened in currency markets last September when the US dollar rose past 145 yen, prompting the Ministry of Finance (MOF) to buy the yen and push the pair back to around 140 yen. The yen is down nearly 10 per cent against the US dollar for the year.

“Lack of verbal intervention so far suggests that the patience level of Japanese authorities may have gone up after the latest tweak to monetary policy and the disinflation trends in the US,” said Charu Chanana, a market strategist at Saxo Markets.

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“Still, traders are potentially cautious of that 145 handle.”

Much of the movement in currencies came late in the Asian session, before the market fell into a summer lull.

The euro slipped before reversing losses to stand flat against the US dollar at US$1.095. The early move helped the US dollar index rise to 103.02, its highest since early July. It was last very slightly lower at 102.82.

Analysts said investors have been buying the safe-haven US dollar over concerns about the health of the global economy, particularly China. They also pointed to a recent rise in US bond yields on the back of persistent strength in the country’s economy.

Chinese property giant Country Garden’s onshore bonds were suspended, and two Chinese listed companies said over the weekend that they had not received payment on maturing investment products from asset manager Zhongrong International Trust.

“High US bond yields and what seems to be a deteriorating environment in the Chinese financial sector are weighing on risk assets,” said Chris Turner, head of markets at ING.

The Australian dollar slid to its lowest since May at US$0.6456 but was last little changed at US$0.649. The currency is often seen as a proxy for investor sentiment about China.

Russia’s rouble fell past 100 per US dollar, driven in large part by the Russian current-account surplus shrinking sharply as energy export revenue dropped and government spending on the Ukraine war remained high.

Sterling edged up to US$1.271.

Economic data could move currencies later in the week. Investors will scrutinise Chinese industrial output and consumer spending data on Tuesday, before minutes from the latest US Federal Reserve meeting on Wednesday. British inflation figures are also due on Wednesday.

Japanese GDP data is due on Tuesday, ahead of inflation figures on Friday.