Get 40% Off
☕ Buy the dip? After losing 17%, Starbucks sees an estimated 20% upside. See the top Undervalued stocks!Unlock list

Japanese yen slides back towards 34-year low after brief spike

Published 26/04/2024, 10:23 am
© Reuters. FILE PHOTO: Banknotes of Japanese yen and U.S. dollar are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/File Photo

By Joice Alves

LONDON (Reuters) - The yen fell on Friday and was trading around its weakest level in three decades, having briefly spiked against the dollar, with markets on edge about possible intervention after the Bank of Japan kept interest rates on hold.

In a volatile trading day, the yen was last down 0.66% at 156.67, after briefly jumping to 154.97, having hit minutes earlier its lowest level of 156.82 per dollar since 1990.

The yen also briefly rallied against other major currencies but last traded near its weakest level in almost 16 years against the euro, at 168.23, and its softest in 11 years against the Australian dollar.

The sudden jump left traders on high alert for signs of intervention. It was not immediately clear what caused the move.

After a two-day meeting, the Bank of Japan left its short-term interest rate target at 0-0.1% on Friday and made small upward adjustments in its inflation forecast. Investors had not expected a policy shift but took the decision as confirmation that only small moves lie ahead.

BOJ Governor Kazuo Ueda told a press conference after the rate decision that monetary policy did not directly target currency rates, but exchange-rate volatility could have a significant impact on the economy and prices.

"If yen moves have an effect on the economy and prices that is hard to ignore, it could be a reason to adjust policy," he said.

Jane Foley, head of FX strategy at Rabobank, said traders had been wondering "whether the Ministry of Finance and BoJ would at least check prices today, but we've had no confirmation that has happened."

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"Certainly the market has been on tenterhooks, and is very sensitive to any sign that the BoJ could be doing that today."

One London-based currency analyst said he suspected the move higher in the yen was down to a position squeeze that sparked others to sell dollars against the Japanese currency in a nervous market.

INTERVENTION WATCH

Traders have been on watch for weeks for possible intervention by Japanese authorities, as even a historic exit from negative rates has failed to lift the currency.

The yen's 11% drop against the dollar this year is the largest fall of any G10 currency, driven mostly by the wide gap between U.S. and Japanese government bond yields, which is more than 378 basis points for the 10-year debt.

That encourages borrowing and short-selling yen in order to earn better interest, or carry, in dollars and other currencies.

The gap could widen even further, and exacerbate pressure on the yen, if data due at 1230 GMT shows a rise in the Federal Reserve's preferred inflation measure - the U.S. core PCE price index.

Japanese Finance Minister Shunichi Suzuki said on Friday he was closely watching currency moves and was prepared to take full action in response.

Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid at the time towards a 32-year low of 152 to the dollar.

Traders now figure there is not much Tokyo can do to reverse the currency's slide while interest rates and momentum are heavily skewed against it.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Elsewhere, yen selling lifted the Australian and New Zealand dollars, and the Aussie is set for its largest weekly gain this year after a surprisingly hot inflation report.

Sterling and the euro were steady, holding gains made on Thursday when data showed the U.S. had grown at its slowest pace in nearly two years.

The U.S. dollar traded 0.02% higher against a basket of currencies at 105.63, after sliding to two-week lows earlier.

(This story has been refiled to remove the repeated words 'on Friday' in paragraph 1)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.