Government expresses ‘urgency’ over yen’s 6 percent gain this month
The yen weakened slightly Friday but then continued strengthening again as traders doubted Japan’s ability to rein in the currency’s rally to a 22-month high.
The currency slipped as much as 0.5 percent earlier Friday after Finance Minister Taro Aso spoke of concern about the yen’s path, calling for coordination over what he described as disorderly moves in foreign-exchange markets.
“We have to monitor the currency market with a sense of urgency so that speculative moves won’t continue — when needed, I’d like to take firm action in line with G-7 and G-20 agreements,” Aso, who is also deputy prime minister, said Friday. “Abrupt changes are not desirable and I think it’s very important for the exchange rate to be stable.”
Traders are the most bullish on the yen in six years after the Bank of Japan stood pat on stimulus Thursday and uncertainty over the United Kingdom leaving the European Union fueled demand for the safest assets. The pound climbed along with the euro after campaigning for the June 23 referendum was suspended following the murder of a British lawmaker.
“The dollar-yen slide is not over yet,” said Gareth Berry, a foreign-exchange and rates strategist in Singapore at Macquarie Bank Ltd. “That trend will continue until we get to 102, at which point I would expect rhetoric from Japan to reach fever-pitch and that should be enough to stop it in its tracks for a while.”
The yen has appreciated more than 6 percent this month. Analysts raised their year-end forecast for the yen to 112, from their January estimate of 125.
There has been no indication from Japan’s G-7 partners that they are open to joint intervention. The last time Japan sold yen to restrain gains was in 2011, in a multilateral intervention following the devastating Tohoku quake and tsunami.
“A single-handed intervention will likely be ineffective in halting the tide, and only a concerted intervention would work,” Stephen Innes, senior trader at Oanda Asia Pacific Pte, wrote in an emailed note. “It’s unlikely to happen.”
Central banks in the U.S., Japan, the U.K. and Switzerland all opted to keep monetary policy unchanged this week as they await the Brexit vote next week. Lawmaker Jo Cox, a fervent advocate of remaining in Europe, was shot and killed Thursday. All campaigning was suspended with the referendum just a week away.
“The Brexit campaigning has been suspended, so perhaps that’s helping market sentiment,” said Roy Teo, senior currency strategist in Singapore at ABN Amro Bank NV. The yen is likely to extend its rally to 101 per dollar ahead of the referendum, a level that will increase the risk of currency intervention by Japanese policy makers, he said.