Dollar Sinks Against Yen, BOJ Intervention Suspected Ahead of Weekend

Dollar Sinks Against Yen, BOJ Intervention Suspected Ahead of Weekend
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NEW YORK, Oct 21 (Reuters) – The U.S. dollar tumbled against the yen on Friday, posting its biggest daily drop against the Japanese currency in more than two months, as traders and strategists said Japanese authorities may be in the market to stop a decline in its battered currency.

the pink yen as high as 144.5 per dollar on Friday, before paring gains to trade as much as 1.4% at 148.195, its biggest daily jump since Aug. 10.

“I think it’s an intervention,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

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“We’re seeing a lot of dollar selling and the yen is moving almost vertically as shorts are contracted,” he said.

The Japanese government and the Bank of Japan carried out a yen-buying and dollar-selling intervention in the foreign exchange market, the Nikkei newspaper said early Saturday, citing a source.

Japan’s Finance Ministry declined to comment on the matter.

“It’s very clear that the Ministry of Finance is stepping in to sell dollar-yen,” said Mazen Issa, senior FX strategist at TD Securities in New York.

“They are trying to staunchly defend their very easy policy,” he said.

“A lot of people had been looking at 150 as a key level that would see some sort of intervention, and they let it slide to basically 152 and then the timing of their intervention happened at a very illiquid time, basically, as London was about to go into house for the weekend, and it appears to be designed to inflict as much pain as possible on speculators, they like to use the term,” Issa said.

Earlier on Friday, Japanese Finance Minister Shunichi Suzuki said authorities were dealing with currency speculators “strictly,” while Bank of Japan Governor Haruhiko Kuroda said the central bank would closely watch the impact of currency moves.

With Friday’s gains, the yen was on track to break a nine-week run of weekly losses against the dollar.

The dollar index, which measures the greenback’s strength against a basket of currencies, was down 0.7% at 112.17, down from a three-week high of 113.95 hit during the session.

The dollar came under pressure after a report said some Fed officials have signaled increased unease with big interest rate hikes to fight inflation, even as they prepare another big rate hike for November.

The Wall Street Journal reported that Fed officials are rushing toward another 0.75 percentage point interest rate hike at their November meeting, while some policymakers have begun signaling a desire to slow the pace of hikes soon. .

Fed officials are then likely to debate whether and how to signal plans to approve a smaller hike in December, according to the report.

The dollar has risen strongly this year helped by the Federal Reserve’s hawkish stance and strong safe-haven demand amid continued uncertainty about the outlook for the inflation-ridden global economy.

Despite its pullback in the Fed’s headlines, the dollar index remains near a two-decade high.

“It’s really hard to bet against the fact that the Fed will need to continue to be quite aggressive in its approach going forward,” said Bipan Rai, head of North American currency strategy at CIBC Capital Markets.

“That ultimately means we still see the dollar on the upside,” Rai said.

Dollar weakness helped sterling rise 0.2% to $1.1261, even as the outlook for the pound remained murky as Britain’s ruling Conservative Party prepares to pick a third prime minister. the country two months later. Liz Truss Resign Thursday.

The coin had risen as much as 1% the day before after Truss announced his departure.

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Information from Saqib Iqbal Ahmed; Additional reporting by John McCrank and Dhara Ranasinghe; Edited by David Gregorio, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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