TOKYO The Japanese yen swung back and forth in early trading on Monday for the second day in a row on rumours that Tokyo was trying to influence the market. However, the dollar, which was riding a wave of safe-haven and yield-driven demand, made it harder for the yen to stop falling.
The drop in the value of the yen has added to broader worries about the world’s third-largest economy. It is making import bills for everything from fuel to food go up even more, and it calls into question the Bank of Japan’s strong commitment to ultra-low interest rates in the face of rapid global monetary tightening to fight high inflation.
Again, Japanese officials wouldn’t say for sure if they had stepped in, but the way prices moved strongly suggested that they had..
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Early on Monday, the Japanese yen jumped by 4 yen to 145.28 per dollar, which showed that the country’s currency regulators stepped in for the second day in a row. They did the same thing on Friday.
The yen, on the other hand, fell back to around 148. This shows how different interest rates are between the U.S. and Japan, as the Federal Reserve continues to tighten monetary policy while the BOJ keeps rates very low.
It was last traded at 148.9 to the dollar in Tokyo during the middle of the day, up from a 32-year low of around 152 on Friday.
The BOJ is in a tough spot.
Since inflation isn’t too high and the economy can’t pick up speed, the central bank doesn’t want to raise interest rates when living costs are going up because that could cause a recession.
On October 27 and 28, the central bank will hold a meeting to set policy. At this meeting, the bank is likely to keep its dovish policy stance.
When the Fed meets the following week, most people expect them to keep raising rates aggressively, which will make the market even more likely to buy dollars and sell yen.
This year, the yen has lost more than 20% of its value against the dollar.
When reporters at the Ministry of Finance (MOF) asked Masato Kanda, the vice finance minister for international affairs, if they had helped again on Monday, he said, “We won’t say anything.”
“We keep an eye on the market around the clock and respond as needed. We’ll keep doing the same thing from now on. ”
STEALTH INTERVENTION
On Saturday, sources told Reuters that the government’s move to buy yen caused the dollar to drop by as much as 7 yen overnight on Friday.
On September 22, Tokyo confirmed that it had entered the market and spent 2.8 trillion yen ($18.80 billion) to keep the yen strong. This was the first time since 1998 that the government had done this. Since then, though, the government hasn’t said anything about whether it has tried to support the currency again.
Tokyo’s foreign reserves, which are worth $1.33 trillion, give it enough power to step in many more times, but traders doubt that Tokyo will be able to stop the yen from falling on its own.
This month, the Group of Seven industrial powers agreed to closely watch the recent volatility, but they didn’t say that they were ready to act together.
“In the past, when the British pound and the Italian lira were in trouble, the governments were not able to protect their currencies. In the same way, Japan’s sneaky intervention doesn’t do much, “Daisaku Ueno, head of foreign exchange strategy at Mitsubishi UFJ (MUFG) Morgan Stanley (MS) Securities, said this.
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“The main reason why the yen is weak is because the dollar is strong. If the U.S. shows signs that it’s done raising rates and might even start cutting them, the yen would stop getting weaker even without any help.”
Finance Minister Shunichi Suzuki said over and over again that big changes in the currency were bad.
He told reporters at the finance ministry, “We can’t let the foreign exchange market move too much because of speculation.” “We will deal with too much volatility in the right way.”
($1 = 148.9000 yen)
