(Bloomberg) — The yen fell to a 10-month low against the dollar, even after Japan issued a sharp warning of sharp currency moves in weeks.
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The country’s top monetary authority said speculative movements could be seen in the foreign exchange market and warned that Tokyo was prepared to act if necessary.
Masato Kanda, deputy finance minister for international affairs, said: “If these measures continue, the government will consider them appropriately without ruling out any other options.”
The comment briefly pushed the yen to $147.37 as traders weighed the risk of Tokyo’s intervention in the market for the first time since October last year, while the greenback recovered at 147.82.
The U.S. currency strengthened against major peers overnight amid a sell-off in Treasuries.
Kanda noted that currencies should move steadily in the market, reflecting the economic fundamentals and that there are rapid movements this year, just like last year. The authorities are looking at the market very fast, he added.
“These developments will bring uncertainty to businesses and households, which will have a negative impact on the economy,” he said.
Japan’s policy stance is contributing to the weakening of the country’s currency. The Bank of Japan is clinging to the last negative interest rate among major central banks, as the Federal Reserve nears the lightning pace of its fight against the highest rate of inflation in decades.
Stimulation Outlook
While the BOJ eased its grip on 10-year government bond yields in July, it is still holding off a move higher. Unless the central bank takes clear steps to scale back its stimulus, weakening pressure on the yen is likely to remain in place.
The Japanese government refuses to re-enter the markets unless absolutely necessary. Currency officials have been quiet in recent days as the yen weakens. They have repeatedly said in the past that they are more concerned about sharp movements in the yen than certain levels against other currencies.
Last year, an estimated $62 billion in inflows occurred after the yen moved more than 2 yen against the dollar in the previous 24 hours. Acting after a peaceful movement helps Tokyo justify intervention to its international allies, such as the US.
“The yen suddenly fell to more than 1 yen overnight, raising concerns about an already verbal intervention,” said Tutomu Soma, bond and currency trader at Monex Inc. Market participants themselves see the 150 line as a major obstacle.
(Adds background on Japanese policy levels.)
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