(Bloomberg) — The yen has fallen above 150 yen to the dollar for the first time since November, as higher-than-expected U.S. inflation dampens bets that the Federal Reserve will cut interest rates early, and Japanese authorities have declined in recent months. caused the strongest backlash.
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Japan's currency rose about 0.2% against the dollar to $150.53 in Tokyo markets on Wednesday, after falling 1% overnight as part of a broader decline in the Group of 10 currencies against the US currency. Continued rise in U.S. prices has fueled speculation that the Fed will need to keep interest rates at 20-year highs for several more months, increasing the relative attractiveness of holding cash in high-yielding dollars. .
Read more: Traders withdraw bets on Fed rate cut by July
The exchange rate movement prompted a series of verbal warnings from top officials at Tokyo's monetary authority.
“Some of the recent rapid movements are consistent with fundamentals, but some are clearly speculative. I think the latter is undesirable,” Masato Kanda, vice minister of finance, told reporters on Wednesday. Ta.
“The authorities stand ready to respond 24/7,” he added in his strongest remarks on the currency since November. He added that the fluctuation of 10 yen in a month seems to be rapid.
His comments were immediately reinforced by Finance Minister Shunichi Suzuki. Japan's 10-year bond yield at one point hit 0.765%, its highest level since mid-December, suggesting investors see a slightly increased likelihood that the Bank of Japan will raise rates soon. ing.
A weaker yen has boosted inflation and benefited exporters, but Japanese policymakers are wary of a sharp depreciation that could disrupt the economy and markets.
Don't rush
The yen has come under new pressure after Bank of Japan Deputy Governor Shinichi Uchida said last week that it was unlikely the Bank of Japan would raise interest rates continuously and rapidly. Japan's currency has fallen more than 23% in the past two years, more than any other major currency tracked by Bloomberg.
Uchida also said that given the current outlook for the economy and inflation, financial conditions will remain accommodative even after the Bank of Japan ends its negative interest rate policy (a view also expressed by Governor Kazuo Ueda).
Keiichi Iguchi, senior strategist at Resona Holdings, said: “Although the authorities used quite a strong tone, the market reaction was relatively muted. This suggests that only real action can stop the move.” said. It has fallen above 150 yen, but if the yen depreciates above 152 yen to the dollar, we may see some serious action. ”
The yen has fallen more than 6% against the dollar so far in 2024, the biggest decline among G10 currencies. On Tuesday, the Japanese currency fell to 150.89. Against the euro, it fell 3.5%, also the worst performance among developed countries.
Japanese authorities intervened in foreign exchange markets in September and October 2022, spending about 9 trillion yen ($60 billion) in an effort to support the currency for the first time since 1998.
“The market is seriously preparing for a bullish yen on expectations that the Bank of Japan will end its negative interest rate policy, but there is no intention to do so in a hurry, nor do we intend to enter a long normalization cycle.'' AGF said Tom Nakamura, portfolio manager at Investment Co., adding that expectations for a strong yen based on the country's central bank's actions should start to unwind.
–With assistance from Anya Andrianova, Saburo Funahiki, Erika Yokoyama, and Emi Urabe.
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