Dollar steady; yen wobbles near 160 as intervention worries linger

Singapore, June 24 (BNA): The dollar was steady on Monday ahead of a fresh U.S. inflation reading that will likely influence the interest rate outlook, while the yen languished near the 160 level, drawing verbal warnings from Japanese authorities as intervention fears grip markets.

 

The yen weakened to 159.94 per dollar in early trade on Monday, its lowest since April 29, when the yen touched a 34-year low of 160.245 leading to Japanese authorities spending roughly 9.8 trillion yen to support the currency, Reuters reported.

 

The yen was last slightly firmer at 159.70 per dollar after Japan’s top currency diplomat Masato Kanda said on Monday authorities will take appropriate steps if there is excessive foreign exchange movement, and that the addition of Japan to the U.S. Treasury’s monitoring list would not restrict their actions.

 

“We will firmly respond to moves that are too rapid or driven by speculators,” Kanda said, but noted authorities have no specific levels in mind on when to intervene.

 

The yen has come under renewed pressure after the Bank of Japan’s (BOJ) decision this month to hold off on reducing bond-buying stimulus until its July meeting. It is down 1.4% in June.

 

“It’s pretty remarkable despite expectations of further BOJ policy tightening dollar/yen continues to creep higher and is now back up to 160,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

 

A summary of opinions at the BOJ’s June policy meeting on Monday showed some policymakers called for raising interest rates in a timely fashion as they saw a risk of inflation overshooting expectations.

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“I think unless the BOJ gives very hawkish hints on policy, which is unlikely, dollar/yen is unlikely to turn around sustainably,” Kong said.

 

The yen, which is highly sensitive to U.S. Treasury yields, is down over 10% against the dollar so far this year, weighed down by the wide difference between rates in Japan and the United States.

 

Demand for carry trades, borrowing yen at low rates to buy higher yielding currencies, has also taken both the Australian and New Zealand dollars to 17-year peaks on the yen.

 


 

H.F.






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