Against the US dollar, the yen fluctuated on Monday as traders grappled with signs of a third round of currency intervention by Japanese authorities and analysts warned that further action could fuel volatility.
After the yen started the morning in Japan at about ¥149.71 per US dollar, the yen reached ¥145.56 at 8:44 AM in a matter of minutes. On Monday afternoon, the yen was back at levels before the morning spike started.
The sharp moves came shortly after Treasury Secretary Shunichi Suzuki emphasized Japan’s determination to curb the yen’s volatility as the currency hovered near its 32-year low.
“We are confronting market speculators vigorously,” Suzuki told reporters in a morning press huddle. “We will react appropriately where necessary, as we cannot tolerate excessive movements in the currency market based on speculation.”
The yen is under significant pressure as the Bank of Japan sticks to its ultra-accommodative monetary policy, unlike the central banks of most advanced economies, which raise interest rates to curb inflation.
Despite the yen’s appreciation, traders in Tokyo said it was still very difficult to say whether Suzuki’s latest attempt at verbal intervention had been accompanied by another purchase of the yen.
Masato Kanda, the country’s top foreign exchange official, declined to comment on whether any action had taken place on Monday.
On Friday, long after the Japanese trading floors closed and the dollar-yen traded for a less liquid part of the day, Japanese authorities conducted a yen-buying operation estimated by dealers at about $30 billion. The move, which lifted the yen from 151.94 on the dollar to ¥144.50, followed a $20 billion intervention in September.
The decision to take action during lower liquidity hours after Tokyo trading rooms closed ran counter to the Japanese government’s suggestion that it intervened to reduce market volatility, currency strategists said.
“The market is very alert to intervention given the uncertainty about what exactly the target is right now,” said Benjamin Shatil, currency strategist at JPMorgan. “Even if authorities have indicated that they want to smooth out volatility, erratic or excessive intervention actually runs the risk of increasing market volatility.”
Strategists said Friday’s intervention had mainly caused frustration among traders in Tokyo, who were unable to respond to the action outside normal market hours in Japan.
Kenta Tadaide, a senior currency strategist at Daiwa Securities, said many traders assumed the yen’s sharp move on Monday was an intervention.
If it was another yen-buying operation, he said authorities would likely have to step in because the yen’s depreciation after Friday’s move was much faster than the gradual wipe-out of the currency’s gains after the September intervention.
“I think the authorities probably thought it would be another month before the yen fell to ¥155, but since it was already back to ¥150 Monday morning, they may have thought an additional intervention would reduce volatility,” Tadaide said. .