TOKYO – The yen held its line against the US dollar on April 30 after making sharp gains the previous day in moves that traders said were sparked by suspected intervention by the Japanese authorities.
At 4.48pm Singapore time, the yen was trading 0.34 per cent lower at 156.88 per US dollar, well off its 34-year low of 160.245 hit on April 29 when traders said yen-buying intervention by Tokyo drove a sizeable rebound of nearly six yen.
Against the Singapore currency, the yen eased 0.17 per cent to 115.1657 per Singapore dollar.
The Japanese authorities have not confirmed that they had stepped into the currency market in support of the yen, but markets remain on heightened intervention alert ahead of the US Federal Reserve’s interest rate-setting meeting this week.
Japan’s top currency diplomat Masato Kanda said on April 30 that the authorities were ready to deal with foreign exchange matters “24 hours”, but declined again to comment on whether the Ministry of Finance (MOF) had intervened.
“There is clearly a possibility that the sharp and sudden lifts in the Japanese yen were sparked by intervention. But the reality is no one knows for sure if the MOF did step into the foreign exchange markets yesterday,” said Ms Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA).
Trading in Asia was thinner than normal on April 29 due to Japan’s Golden Week holiday, as the yen saw its biggest one-day gain in 2024 on the dollar.
Official figures that would reveal whether intervention did in fact occur will not be available until late May.
Markets in Japan will be closed again on May 3 for the holiday.
The Japanese currency still sits lower than it was before the Bank of Japan’s policy announcement last week.
That could bode ill for the yen as the Fed begins its two-day monetary policy meeting on April 30, where it is expected to hold rates at 5.25 per cent to 5.5 per cent, with US inflation proving to be sticky.
The Fed is expected to strike a hawkish message, meaning more yen selling is likely, CBA’s Ms Kong said.
“The implication is the MOF will likely be forced to step in more than once to slow the rise in USD/JPY.”
A fragile economic recovery is also likely to constrain the Bank of Japan’s options, as any over-tightening in policy could tip Japan into recession.
Data showed Japan’s factory output rose at a better-than-expected 3.8 per cent pace in March from the previous month, though retail sales for the same month undershot market forecasts.
The US dollar consolidated around 105.73 against a basket of currencies ahead of the Fed’s meeting, after slipping 0.25 per cent in the previous session.
Traders have continued to pare back bets of Fed rate cuts in 2024 amid the hotter-than-expected US economic data and stubborn inflation numbers.
A rate cut in September was looking like a close call at just 44 per cent, according to CME Group’s FedWatch tool.
However, other major central banks such as the European Central Bank and the Bank of England may begin to cut rates in the near future. REUTERS
