(Bloomberg) — The yen remained under pressure and held near a key level against the greenback on Monday, even as Japan’s top currency official warned authorities were prepared to intervene in currency markets 24 hours a day if necessary.
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Finance Minister Masato Kanda said, “Excessive exchange rate fluctuations have a negative impact on the national economy.” “If there is excessive movement based on speculation, we are prepared to take appropriate action.”
Kanda was speaking as the yen was hovering near the psychological level of 160 versus the dollar and the weakness of 160.17 set on April 29 when Japan is thought to have entered the market. The yen was little changed at 159.81 at 9:59 a.m. in Tokyo, near its weakest level in about 34 years.
Japan acknowledged spending 9.8 trillion yen ($61.3 billion) on currency market intervention in the month from April 26 to May 29. Authorities did not specify a date for the government-ordered Bank of Japan action, but trading patterns include: It indicates that there were two major interventions on April 29 and May 1. Japan is likely to have sold government bonds to fund the move, according to foreign exchange reserves data.
“The BOJ’s next intervention is likely to come after USD/JPY triggers buy orders above its late-April high of 160.20,” said Tony Sycamore, market analyst at IG Australia. He said the yen’s decline against the dollar last week was driven by stronger-than-expected U.S. Purchasing Managers Index data and the BOJ’s reluctance to provide detailed plans for tapering bond purchases.
The BOJ may make deeper cuts to bond purchases after seeing the views of market participants, a policy committee member said at a meeting this month, according to a summary of comments released Monday. One member said the BOJ should consider further adjustments to monetary easing because of the risk of rising inflation.
Kanda said global authorities were in daily contact with each other on a wide range of issues, including currency. The market is paying attention to the level of exchange rates and is highly wary of foreign exchange intervention, a Japanese official said.
Kanda said his colleagues in Washington had no problem with Japan’s intervention. “The most important thing for them is transparency,” he said. Kanda said the U.S. decision to add Japan to its currency watch list had no impact on Japan’s currency strategy.
(Updated charts and analyst comments)
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