SINGAPORE - The Japanese currency jumped suddenly against the US dollar on April 29, with traders citing yen-buying intervention by the Japanese authorities to try to underpin a relentless tumble in the currency to levels last seen more than three decades ago.
The US dollar fell sharply to 155.01 yen from as high as 160.245 earlier in the day. Banking sources said Japanese banks were seen selling dollars for yen.
At 6.03pm Singapore time, the yen was trading at 155.73 per US dollar, up 1.6 per cent from its previous close.
Against the Singapore currency, the yen also reversed course, up 1.4 per cent to 114.518 after earlier dropping to 116.943.
Japan’s top currency diplomat Masato Kanda said on April 29 that current developments in the exchange-rate market were “speculative, rapid and abnormal”, and they could not be overlooked.
Mr Kanda declined to comment when asked by reporters whether the authorities intervened in the currency market to prop up the yen.
But he described the yen’s declines since late last week as “excessive volatility driven by speculative trading”, suggesting that the moves justified intervening in the currency market.
“The developments we’re seeing now... can be described as speculative, rapid and abnormal volatility. The damage such moves inflict on the economy is hard to overlook,” he said.
“As such, we hope to continue taking appropriate action as needed,” added Mr Kanda, who, as vice-finance minister for international affairs, oversees Japan’s currency policy.
He also said the authorities were ready to act “24 hours, 365 days”, when asked about the chance of intervening in the currency market.
Japan’s Ministry of Finance (MOF) was not immediately available for comment, with markets in the country closed on April 29 for the Golden Week holiday.
“Today’s move, if it represents intervention by the authorities, is unlikely to be a one-and-done move,” said Mr Nicholas Chia, Asia macro strategist at Standard Chartered Bank in Singapore.
“We can likely expect more follow through from MOF if USD-JPY travels to 160 again. In a sense, the 160-level represents the pain threshold, or new line in the sand for the authorities.”
Traders had been on edge for weeks for any signs of action from Tokyo to prop up a currency that has fallen 11 per cent against the US dollar so far in 2024. The yen’s plunge to 34-year lows has come despite a historic exit from negative rates in March as traders bet Japanese rates will remain low for some time.
A weaker yen is a boon for Japanese exporters, but is a headache for the country’s policymakers as it increases import costs, adds to inflationary pressures and squeezes households.
The yen has been under pressure as US interest rates have climbed and Japan’s have stayed near zero, driving cash out of yen and into dollars to earn so-called “carry”.
The suspected intervention comes just days ahead of the Federal Reserve’s May 1 policy review, with investors already anticipating a delay in Fed rate cuts after a batch of sticky US inflation data and as the central bank’s officials including chairman Jerome Powell emphasise even those plans are dependent on data.
Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards 152 to the dollar, a 32-year low at the time. Tokyo is estimated to have spent as much as 9.2 trillion yen (S$79.8 billion) defending the currency.
The United States, Japan and South Korea agreed earlier this month to “consult closely” on currency markets in a rare warning and Tokyo has stepped by its rhetoric against excessive yen moves.
The yen has also hit multi-year lows against the euro, Australian dollar and Chinese yuan. REUTERS
