Japan’s yen jumps, traders alert to intervention risk

[LONDON/SINGAPORE] The yen jumped suddenly against the dollar on Thursday, with traders alert to the prospect of intervention from Japan to prop up its stubbornly weak currency and jumpy about a possible new approach to currency-buying from Japanese officials.

It was not immediately clear what drove the move or whether Japanese authorities were in the market, with traders speculating that a possible rate check had taken place. The rally appeared smaller than that after previous bouts of intervention.

The dollar fell by as much as 0.9 per cent to 161.115 yen and was last trading at 161.58, down 0.6 per cent.

Japan’s Ministry of Finance declined to comment.

“I think it (dollar/yen move) is jittery price action,” said Derek Halpenny, head of research for global markets EMEA at MUFG in London.

“We have payrolls and a holiday, liquidity conditions will be thin, so markets are nervous about potential intervention,” he said, referring to key US jobs data due later on Thursday before a US public holiday on Friday.

Sources told Reuters Japanese officials are abandoning their habit of telegraphing intervention risks, instead signalling a more targeted campaign to squeeze speculators and raise the cost of betting against the battered yen.

Officials are also avoiding any suggestion of a specific “line in the sand” exchange-rate level that would trigger action.

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“The initial move looked like somebody was in the market, but the current way it is trading higher, we’d question it and I’d lean towards the rate-check rumour,” said Bart Wakabayashi, branch manager at State Street in Tokyo.

“The market is nervous, and that move just proved that the market is nervous, which is good news for the Ministry of Finance.”

A rate check refers to authorities calling dealers to ask for prices for buying and selling yen, and is seen by traders as a possible precursor to intervention. It was not confirmed that such checks had taken place, however.

The yen crossed the 162 per dollar level earlier this week to its weakest in 40 years, pressured by Japan’s relatively low interest rates. It has weakened around 3 per cent against the dollar so far this year.

It received little help from a well-telegraphed Bank of Japan rate hike in June and an interim ceasefire between the US and Iran, and no lasting boost from more than US$70 billion in dollar-selling intervention in April and May.

The yen has unwound all of its gains since Japan last intervened, pressured by persistent dollar strength and growing expectations of a Federal Reserve rate hike this year, while the BOJ is expected to maintain its gradual approach to policy tightening.

“If this (dollar-yen fall) was caused by the intervention, the move was small,” said Takeshi Ishida, strategist at Kansai Mirai Bank in Osaka. REUTERS