THE yen slid to the weakest level in about 34 years against the US dollar, fanning speculation that Japan will step up its effort to slow the decline.
The currency declined 0.3 per cent to 151.97 per US dollar in Tokyo, passing the 151.95 level set in October 2022, as a hawkish Bank of Japan (BOJ) board member said financial conditions will remain accommodative. The yen subsequently pared losses after Finance Minister Shunichi Suzuki said Japan’s government will take bold action on the currency if necessary.
“Given recent history a breach of 152 could instigate intervention,” said Rodrigo Catril, a senior FX strategist at National Australia Bank in Sydney. “The break of previous high has accelerated the move,” he said, referring to the US dollar-yen.
Investors expect the interest-rate differentials between Japan and other developed economies, notably the US, to remain wide even after the BOJ ended the world’s last negative interest-rate regime last week. That is undermining the yen as investors favour higher-yielding currencies elsewhere.
BOJ board member Naoki Tamura said the manner in which monetary policy is managed, is going to be extremely important for a slow, steady normalisation to put an end to extraordinarily large-scale easing.
Option traders were watching the US dollar-yen pair as a rise to 152 would trigger some knockout barriers at that level, according to traders. A breach of the barrier may see the currency pair extend gains as investors who held the reverse call options will need to cover large short US dollar-yen positions, said traders.
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Masato Kanda, vice finance minister for international affairs, said on Monday (Mar 25) that the current weakening of the yen is not in line with fundamentals. “We will take appropriate action against excessive fluctuations, without ruling out any options,” he told reporters.
Japan spent more than nine trillion yen (S$59.3 billion) during three forays into the market in 2022 to bolster the yen in September and October. The first intervention came when the yen was much stronger than the current level. BLOOMBERG
