SINGAPORE, Aug 3 (Reuters) – The yen surged against the dollar on Monday, putting traders on alert for further intervention by Japanese authorities to shore up the currency, after Tokyo confirmed coordinated yen-buying intervention with the United States last week.
The yen surged more than 1% against the dollar to an intraday high of 155.20, its strongest since early May, having hovered near 40-year lows, pressured by Japan’s low interest rates as higher energy prices hit its terms of trade.
Japanese Finance Minister Satsuki Katayama said she had no comment on whether there was intervention on Monday.
COMMENTS:
CHANDRESH JAIN, EM ASIA FX AND RATES STRATEGIST, BNP PARIBAS, SINGAPORE:
“It’s difficult to know exactly whether authorities have come in today or not … I think the market was also reading the comments which came out from the U.S. side … so I think the people who were running long dollar/yen positions … they started stopping out on those positions (this) morning.
“These interventions come and go, time to time, but dollar/yen has still travelled one side only, on the higher side, all the time. So it clearly shows that the market is not bothered about these interventions and if, and only if, BOJ can start hiking aggressively, then things can change.”
YUJI SAITO, EXECUTIVE ADVISER, SBI FX TRADE, JAPAN:
“The sharp drop in dollar/yen was likely due to additional intervention being conducted. In the statement released this morning, both Japan and the U.S. emphasised that they will continue to intervene going forward.
“Correcting toward a stronger yen has become a shared interest for both Japan and the U.S., so the cooperation is functioning smoothly.
“Whether they actually use the Foreign and International Monetary Authorities Repo Facility (FIMA Repo Facility) is another matter, but if utilised, there would be no issue even if they continue large-scale intervention beyond what is currently expected.”
TSUYOSHI UENO, SENIOR ECONOMIST, NLI RESEARCH INSTITUTE, JAPAN:
“The fundamentals driving yen-selling pressure have not changed, and I do not expect a one-sided yen appreciation to continue following the intervention.
“As long as the funding sources for measures like consumption tax cuts remain vague, pressure toward a weaker yen and higher interest rates will continue to smolder toward the end of the year. Looking ahead, if a situation arises where yen weakness persists even as U.S. interest rate risks recede, the U.S. may begin to distance itself from this cooperative relationship.”
MATT SIMPSON, SENIOR MARKET ANALYST, STONEX, BRISBANE:
“It feels like a safe bet that the Japanese yen has troughed for the year. The words ‘joint intervention’ carries a lot of weight in these markets and is a term rarely used. But the timing also suggests the Fed and BOJ are leaning into momentum post-FOMC. We should also factor in that traders seem more willing to bet alongside the BOJ than against them this time around.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
“The coordinated intervention has materially raised the cost of betting against the yen. It not only caught speculative positioning offside but also increased the risk of follow-up action, which should make investors more cautious about rebuilding aggressive short-yen positions.
“That said, intervention changes market psychology more quickly than it changes fundamentals. Without support from narrower rate differentials or stronger confidence in Japan’s fiscal outlook, the yen could gradually come under pressure again, once official support fades.”
FRANCIS TAN, CHIEF ASIA STRATEGIST, INDOSUEZ WEALTH MANAGEMENT, SINGAPORE:
“It’s hard to know until they declare it … it could also be the market unwinding … because the yen is a really popular funding currency for a lot of trades around the world.
“Central banks, whenever they do any operation, even in this case, a joint operation, credibility is very important because if it’s not credible, it will fail to arrest anything they want to stop … The BOJ wants to increase its credibility by joining hands with the world’s biggest central bank.”
NICK TWIDALE, CHIEF MARKET STRATEGIST, ATFX GLOBAL, SYDNEY:
“They are clearly determined to make a solid effort in strengthening the yen as the billions of dollars they have spent and joint moves have proved.
“However, there will need to be a change in the underlying fundamentals for these moves to be sustainable. The market will challenge these moves once they feel the action has been completed.
“And ultimately we will see much more volatility in the short term because of the Japanese authorities’ actions, which of course is in complete contradiction of what they are claiming to do.”
TAKASHI ISHIDA, STRATEGIST, KANSAI MIRAI BANK, OSAKA:
“Japan’s authority broke the silence and has shown its aggressiveness to stem the yen’s weakness. It must be serious about supporting the yen.
“The yen’s momentum will last as long as September or October if the Bank of Japan is to raise interest rates. It looks like the intervention is done with pairs with the BOJ’s rate hikes.”
(Reporting by Asia markets team; Editing by Clarence Fernandez and Jacqueline Wong)
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