Yen rally eases after Tokyo hints at intervention

The yen’s soaring rally took a breather in Asian trading Monday after Japanese finance minister Taro Aso warned over the surge, vowing to take action “when necessary”. The weekend remarks hinted at a possible market intervention in the wake of the Bank of Japan’s shock policy decision last week that caused the yen to surge to an 18-month high against the dollar.
On Monday, the greenback edged up to 106.56 yen from 106.31 yen in New York Friday, its lowest level since October 2014.
But the unit was still way down from above 111 yen before the BoJ announcement. Japanese financial markets were closed Friday for a public holiday.
The central bank caught markets off guard Thursday as it held off another round of stimulus, confounding expectations it would act after a double earthquake and a string of weak data readings for the world’s number three economy.
“Our official target continues to be 103, but I personally think the risk of breaking 100 can’t be ruled out, and in that case Japanese authorities are likely to move,” Tohru Sasaki, head of Japan markets research at JPMorgan, told Bloomberg news.
“If dollar-yen breaks 100, and even if Japanese authorities move, probably that’s not enough to provide significant support” for the greenback, he said.
On Saturday, Aso said the yen’s rally was “extremely worrying”.
“The yen strengthened by five yen in two days. Obviously one-sided and biased, so-called speculative moves are seen behind it,” Aso told reporters.
“Tokyo will continue watching the market trends carefully and take actions when necessary.”
Aso has reiterated that Japan could intervene in forex markets to stem the unit’s steep rise, saying moves to halt the currency’s speculative rally would not breach a G20 agreement to avoid competitive currency devaluations.
Japan last intervened in currency markets around November 2011, when it tried to stem the yen’s rise against the greenback to keep an economic recovery on track after the quake-tsunami disaster earlier that year.
In other trading Monday, the euro strengthened to 122.20 yen and $1.1467 compared with 121.75 yen and $1.1452 in US trade.
The dollar has been under pressure since the US Federal Reserve’s go-slow signal on interest rate hikes last week.
Surprisingly weak US consumer data Friday showed Americans spent only 0.1 percent more in March than they had in February, despite rising incomes.
The downbeat consumer report added to concerns about the strength of the US economy — denting hopes for a rate hike — after Thursday’s report showing it grew at only a 0.5 percent annual rate in the first quarter.