Yen weakens, paring sharp rise after suspected intervention

Thursday,   02-May-2024   01:47 PM (IST)

The yen dropped against the dollar on Thursday, reversing direction after a sudden surge late on Wednesday that traders and analysts were quick to attribute to intervention by Japanese authorities. The yen was 0.5% lower at 155.30 per dollar as of 0746 GMT, retracing about half of its late Wednesday surge from around 157.55 to exactly 153 over a period of about 30 minutes. The sharp move on Wednesday came in a quiet period for markets after Wall Street had closed, and hours after the U.S. Federal Reserve had wrapped up its policy meeting. The dollar was already on the back foot as Fed Chair Jerome Powell confirmed the central bank's easing bias, even as he reiterated that sticky inflation meant interest rate cuts may be a while in coming. Japan's vice finance minister for international affairs, Masato Kanda, who oversees currency policy at the MOF, told Reuters he had no comment on whether Japan had intervened in the market. The dollar remains up more than 10% against the yen this year, as traders push back expectations on the timing of a first Fed rate cut, while the Bank of Japan has signalled it will go slow with further policy tightening after raising rates in March for the first time since 2007. The MOF likely intervened in the currency market to signal they see 160 yen per dollar as their line in the sand, Columbia University academic and former finance ministry executive Takatoshi Ito told Reuters in an interview on Thursday. The dollar index , which measures the currency against the yen, euro, sterling and three other major peers, was down 0.1% at 105.58 on Thursday, following a 0.6% retreat on Wednesday from near six-month highs. The euro was up 0.1% $1.0727, after climbing 0.5% in the previous session. Sterling gained 0.1% to $1.2544, adding to Wednesday's 0.3% rise. As widely expected, the Fed held rates steady on Wednesday and Powell stressed it "will take longer than previously expected" for policymakers to become comfortable that inflation will resume the decline towards their 2% target. At the same time, he characterized the risk of more hikes as "unlikely."