Forex traders have their eyes fixed on Japan, as the government threatened possible currency intervention after the yen’s continued poor performance and sell-offs fired up by the Bank of Japan (BOJ). After the country’s Ministry of Finance indicated it is ready to take action, the yen narrowly avoided a year-to-date low on Wednesday.
Japan warns of yen intervention after BOJ-instigated sell-off
Tuesday saw the currency’s foremost one-day drop since April. This move followed the BOJ’s disappointing attempt to cap bond yields. Masato Kanda, the top currency official at the Ministry of Finance, emphasised:
We’re on standby. But I can’t say what we’ll do, and when – we’ll make judgments overall, and we’re making judgments in a state of urgency.
After this statement, the yen gained a slight 0.3% after its 1.7% plunge on Tuesday. However, this nominal reprieve seems paltry in the face of the currency’s long-term slide towards the 152-per-dollar mark.
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When last the yen displayed these movements, Japan spent more than $60bn buying up the currency. Records also show that the yen hit its lowest point against the euro since 2008. Kanda confirmed the country’s worry and commented:
We’re very concerned about one-sided, sudden moves in currencies. Fundamentals don’t move several yen in one night.
Kanda, in follow-up comments, said it looks like speculation drove the recent performance of the yen. Despite these statements, official ministry finance records show no action from the government’s side between 28 September and 27 October. Notably, this includes 3 October when the yen fell to 150.16 per dollar and suddenly backtracked to 147.43 per dollar.
