Fragile yen picks up as intervention chatter runs rife, US dollar slips
THE yen rose slightly on Wednesday (Oct 4), moving away from the closely watched 150-per-US-dollar mark, after a short-lived surge in the previous session stoked speculation that Japanese authorities could have intervened to support the currency.
The Japanese currency was up around 0.12 per cent at 148.91 per US dollar in early European trading, after unexpectedly surging nearly 2 per cent at one point on Tuesday to 147.30. The spike came after it slipped to 150.165 per US dollar, its weakest since October 2022.
Meanwhile, the US dollar index, which tracks the greenback against six peers, was down 0.33 per cent at 106.73 as it gave up some of its recent gains. Yet it remained close to the nearly 11-month high of 107.34 reached in the previous session.
The euro rose 0.41 per cent to US$1.0509. But it did not stray far from Tuesday’s low of US$1.0448, its weakest level since December, triggering talk of a fall back to US$1.
Japan’s top currency diplomat, Masato Kanda, said he would not comment on whether Tokyo intervened in the exchange rate market overnight, although he said that “we have only taken steps that have the understanding of US authorities”.
The Bank of Japan’s money market data showed on Wednesday that Japan likely did not intervene in the currency market a day earlier.
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Analysts were divided on the issue. “Japan stepping in here would be perfectly consistent with recent warnings from top officials and past behaviour,” said James Malcolm, head of FX strategy at UBS.
Nicholas Rees, FX market analyst at broker Monex Europe, said it was “not necessarily fresh intervention”.
“Markets have been hesitant to take USD/JPY north of 150 on intervention risk for a week now, it’s unsurprising to see skittish downside price action once the level was broken,” he said.
Japanese authorities last year intervened to prop up the yen for the first time since 1998.
The currency has slumped around 14 per cent against the US dollar this year as US bond yields have risen sharply compared to their Japanese peers as the Federal Reserve has hiked interest rates.
US dollar power
The US dollar slipped after rising 0.85 per cent over the previous two days, boosted by upbeat data on Tuesday showing US job openings unexpectedly increased in August.
Adam Cole, chief currency strategist at RBC Capital Markets, said the greenback was slipping as investors moved out of cash and into stocks and bonds on Wednesday.
He said the recent rally in the US dollar had been driven by a move to cash as markets fall. “This is a sort of re-run of the price action that we saw for most of 2022, when bonds and equities both fall and the dollar is the beneficiary.”
The greenback has rallied around 3.5 per cent over the last three months, boosted by a sharp rise in US bond yields as growth has stayed strong, and the Fed looks set to keep interest rates high for longer than previously expected.
The euro rose even as data showed that eurozone retail sales fell much more than expected in August and that the bloc’s economy probably shrank last quarter.
Sterling climbed 0.49 per cent to US$1.2137, rebounding after falling to a nearly seven-month low of US$1.20535 in the previous session.
Elsewhere, the New Zealand dollar fell after its central bank held the cash rate steady at 5.5 per cent, as policymakers grew more confident that past hikes were working to bring down inflation as desired.
The decision sent the kiwi sliding more than 0.5 per cent to a nearly one-month low of US$0.5871. But it last traded US$0.5901, flat on the day. REUTERS
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