(Bloomberg) — The yen remained under pressure and near key levels against the dollar on Monday, even as Japan’s top currency official warned that authorities are ready to intervene in currency markets 24 hours a day if necessary.
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“If there are excessive currency fluctuations, it has a negative impact on the national economy,” said Deputy Finance Minister Masato Kanda. “In the event of excessive movements based on speculation, we are prepared to take appropriate action.”
Kanda spoke as the yen moved just below the psychological level of 160 per dollar and the weak point of 160.17 set on April 29, when Japan is thought to have entered the market. While the recent moves have been gradual, the yen has already lost that much of the gains made since the suspected interventions on that day and on May 1st.
It fluctuated in a narrow range during trading in Tokyo on Monday and was little changed at 159.72 at 3pm, which still leaves it near its weakest level in about 34 years.
Japan has admitted spending ¥9.8 trillion ($61.3 billion) intervening in currency markets between April 26 and May 29. Authorities have not specified the dates when the Bank of Japan was ordered to take action, but trading patterns indicate there were two main rounds of intervention on April 29 and May 1. Foreign reserves data show that Japan is likely to sell Treasuries to help finance the move.
“We suspect the next round of BOJ intervention is likely to come after USD/JPY triggers buy orders above the late April high of 160.20,” wrote Tony Sycamore, market analyst at IG Australia. He said the yen’s decline against the dollar last week was driven by stronger-than-expected US purchasing managers’ index data and the BOJ’s reluctance to provide a detailed plan on tapering bond purchases.
The BOJ may make more substantial cuts in bond purchases after checking the views of market participants, a policy board member said at this month’s meeting, according to a summary of opinions released Monday. One member said the BOJ should consider further adjusting monetary easing as there are high risks to inflation.
The pace of currency movements is also important to Japanese officials, and by this measure may not be enough to trigger immediate intervention. A gauge measuring the dollar-yen’s move from a 28-day low to Monday’s high rose to ¥6.32, about ¥3.7 below moves in 10 yen which Kanda has previously described as “fast”. This suggests that speculation for an intervention may intensify when the currency pair reaches 163.
In the currency options market, the premium to hedge against a rise in the yen against the dollar against a slide in the Japanese currency fell for a fifth day, reflecting traders’ expectations that the yen still has room to weaken.
Global authorities are in touch with each other on a daily basis on a wide range of issues, including currencies, Kanda said. The market is paying close attention to the currency’s levels and there is a strong sense of caution about currency intervention, the Japanese official said.
Kanda’s boss, Finance Minister Shunichi Suzuki, underlined Japan’s stance on the yen on Monday. The government was closely monitoring foreign exchange movements and would take appropriate measures against excessive currency movements if necessary, he said.
Kanda said his counterparts in Washington have no problem with Japan’s interference. “The most important thing for them is transparency,” he said. Kanda said a US decision to add Japan to its currency list had no impact on the Japanese currency’s strategy.
–With assistance from Masaki Kondo, Michael G. Wilson and Daisuke Sakai.
(Adds the latest yen price)
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