Dollar set for sharp weekly loss versus yen after Japan steps in
The dollar logged its sharpest weekly drop against the yen since February amid suspected Japanese intervention. Authorities signalled discomfort with currency volatility, keeping markets cautious. However, sustained yen strength remains uncertain ...
By Reuters |
The dollar was headed for its biggest weekly loss against the yen since February on Friday after Japan was reported to have intervened to support its currency.
Markets remained on edge after Japan's top currency diplomat, Atsushi Mimura, said speculative positions were still evident, underscoring authorities' unease over rapid yen moves.
The dollar briefly slid from around 157.1 to 155.49 against the yen before recouping some losses after Mimura's remarks. It was last up 0.26% to 157.04.
"The durability of intervention remains uncertain," said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.
"Historically, its effects tend to fade without accompanying policy shifts, rate hikes or coordination."
Two sources familiar with the matter told Reuters that officials had intervened to buy the yen on Thursday after it hit 160.7 per dollar, its weakest since July 2024.
Japan is heading into its Golden Week holiday next week, with analysts speculating that officials could step in to support the yen again.
"Given that the authorities conducted FX interventions during the Golden Week holiday in 2024, and that interventions in both 2022 and 2024 were carried out on consecutive days, the risk of additional intervention - even during the holiday period - remains, if USDJPY rebounds sharply towards 160," said Barclays analysts led by Shinichiro Kadota.
"Looking at past patterns, consecutive interventions have not necessarily been triggered only when USDJPY returned to the previous intervention level; rather, authorities have tended to step in again when the pair rebounded sharply."
INTERVENTION BILL
Bank of Japan data released on Friday suggested authorities may have spent up to 5.48 trillion yen ($35 billion) during the operation, just below the $36.8 billion deployed in July 2024.
The yen has been under sustained pressure from wide U.S.-Japan interest rate differentials. Its weakness has been compounded by higher oil prices linked to the Iran war, which have supported the dollar.
The dollar was on track for its steepest weekly decline against the yen since early February, down about 1.7%.
INTEREST RATE CALLS
The European Central Bank and the Bank of England held interest rates steady on Thursday, in line with expectations, following earlier pauses by the Federal Reserve and the Bank of Japan.
However, both the ECB and BOJ signalled they could begin raising rates as soon as June to curb inflationary pressure stemming from higher imported energy costs.
The euro was flat at $1.1721, heading for a second consecutive weekly gain. Sterling was last down 0.16% at $1.135803 and poised to snap four straight weeks of advances.
The dollar was last down 0.03% to 0.78150 against the Swiss franc and was set for its second week of losses.
"While markets are pricing roughly a two-thirds chance of a June hike from the BOJ, expectations for Fed cuts have largely evaporated," Shinohara said. "That divergence, alongside a more hawkish Fed, limits the scope for sustained yen appreciation."
Markets remained on edge after Japan's top currency diplomat, Atsushi Mimura, said speculative positions were still evident, underscoring authorities' unease over rapid yen moves.
The dollar briefly slid from around 157.1 to 155.49 against the yen before recouping some losses after Mimura's remarks. It was last up 0.26% to 157.04.
"The durability of intervention remains uncertain," said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.
"Historically, its effects tend to fade without accompanying policy shifts, rate hikes or coordination."
Two sources familiar with the matter told Reuters that officials had intervened to buy the yen on Thursday after it hit 160.7 per dollar, its weakest since July 2024.
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Japan is heading into its Golden Week holiday next week, with analysts speculating that officials could step in to support the yen again.
"Given that the authorities conducted FX interventions during the Golden Week holiday in 2024, and that interventions in both 2022 and 2024 were carried out on consecutive days, the risk of additional intervention - even during the holiday period - remains, if USDJPY rebounds sharply towards 160," said Barclays analysts led by Shinichiro Kadota.
"Looking at past patterns, consecutive interventions have not necessarily been triggered only when USDJPY returned to the previous intervention level; rather, authorities have tended to step in again when the pair rebounded sharply."
INTERVENTION BILL
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Bank of Japan data released on Friday suggested authorities may have spent up to 5.48 trillion yen ($35 billion) during the operation, just below the $36.8 billion deployed in July 2024.
The yen has been under sustained pressure from wide U.S.-Japan interest rate differentials. Its weakness has been compounded by higher oil prices linked to the Iran war, which have supported the dollar.
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The dollar was on track for its steepest weekly decline against the yen since early February, down about 1.7%.
INTEREST RATE CALLS
The European Central Bank and the Bank of England held interest rates steady on Thursday, in line with expectations, following earlier pauses by the Federal Reserve and the Bank of Japan.
However, both the ECB and BOJ signalled they could begin raising rates as soon as June to curb inflationary pressure stemming from higher imported energy costs.
The euro was flat at $1.1721, heading for a second consecutive weekly gain. Sterling was last down 0.16% at $1.135803 and poised to snap four straight weeks of advances.
The dollar was last down 0.03% to 0.78150 against the Swiss franc and was set for its second week of losses.
"While markets are pricing roughly a two-thirds chance of a June hike from the BOJ, expectations for Fed cuts have largely evaporated," Shinohara said. "That divergence, alongside a more hawkish Fed, limits the scope for sustained yen appreciation."
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