The yen’s decline towards multi-decade lows keeps markets on watch for intervention

The yen's decline towards multi-decade lows keeps markets on watch for intervention

By Ray Wee

SINGAPORE (Reuters) – The battered yen remained stuck near a three-decade low against the dollar on Tuesday, struggling to find ground as the Bank of Japan’s ultra-loose monetary policy settings remained at odds with the prospect of higher interest rates. Rates are longer elsewhere.

The Japanese currency fell to its lowest level in 15 years at 162.38 to the euro in early Asian trading and fell to the lowest level in almost three months at 186.25 to the pound sterling.

Against the dollar, the yen reached 151.72 yen in recent transactions, approaching the lowest level in a year at 151.92 recorded on Monday. A break below last year’s low of 151.94 to the dollar would represent a new 33-year low for the yen.

The yen jumped briefly against the US dollar in New York hours on Monday after hitting its lowest level since the beginning of the year, which analysts attributed to a flurry of trading in options due this week rather than any intervention moves from Japanese authorities.

“I also tend to think it was not BOJ intervention… The yen’s bout of strength was very short and reversed very quickly, and if it had been BOJ intervention, I would have expected a longer-term continuation.” Carol Kong, currency strategist at the Commonwealth Bank of Australia, said that the strength of the Japanese yen.

Despite carefully coordinated steps by the Bank of Japan to phase out its controversial yield curve control policy and hints at an imminent end to negative interest rates, the partial moves have done little to keep the yen higher, especially as central banks globally maintain their monetary policy hold. . Tough rhetoric about higher interest rates for longer.

“I think the market has realized that the BOJ will exit policy but at a very slow and cautious pace,” said Rodrigo Catril, chief foreign exchange market strategist at National Australian Bank (NAB).

“The weak yen will probably stay here a little longer, testing the market to see what the appetite is, especially for the (Finance Ministry) and the Bank of Japan, to allow for weaker levels.”

In September last year, the Japanese authorities intervened in the currency market to enhance the value of the yen for the first time since 1998, after the Bank of Japan’s decision to maintain its excessively loose monetary policy led to the yen’s value falling to 145 yen to the dollar.

It intervened again in October 2022 after the yen fell to a 32-year low of 151.94.

Inflation and the Fed

Outside Asia, traders are also focusing on US inflation figures due later on Tuesday, which will provide more clarity on whether the Fed will need to raise interest rates further to tame inflation.

Federal Reserve Chair Jerome Powell and his group of policymakers in recent days have pushed back against market expectations that the US central bank is done with its aggressive interest rate hike cycle after it held interest rates steady at its last policy meeting.

These comments kept the US dollar in demand, and against the US dollar, the New Zealand dollar fell to its lowest level in more than a week at US$0.58705.

The British pound fell 0.03 percent to $1.2274, while the euro fell 0.02 percent to trade at $1.06965.

“Overall, the market is also somewhat stressed due to all the messaging coming from central banks, and a longer rally and wait-and-see mode keeps volatility low,” NAB’s Cattrell said.

“We need to wait for tonight’s CPI number, which could be a bit shaky. If it’s strong, it obviously brings the idea of ​​another rate hike from the Fed.”

The Australian dollar fell 0.1 percent to $0.6370.

Domestic data was mixed with Australian business conditions flat in October, but consumer confidence declined in the wake of last week’s interest rate hike by the Reserve Bank of Australia.

(Reporting by Ray Wee. Editing by Sam Holmes and Shri Navaratnam)

#yens #decline #multidecade #lows #markets #watch #intervention