The yen slumped back past 150 per dollar again, piling pressure on the Bank of Japan ahead of a policy decision next week and raising the risk of government intervention in the currency market.
With another rout in US debt amplifying the yield gap to Japan, the yen ended the New York trading session Wednesday at 150.23, something last seen in August 1990. That’s put it within range of the 151.95 intraday nadir reached last October when Japan bought the currency to stem losses.
“The stakes are raised clearly,” said Bipan Rai, CIBC’s global head of foreign-exchange strategy in Toronto.
Japan spent around ¥9 trillion ($60 billion) in September and October last year across three occasions in their first intervention to support the yen since 1998. This year the currency has weakened more than 12% against the dollar, making it the worst performer among its Group-of-10 peers.
The yen touched 150.16 on Oct. 3 before a sharp reversal that stoked speculation that Japan had entered the market. It traded at 150.18 as of 8:32 a.m. in Tokyo on Thursday.
Officials neither confirmed nor denied whether they propped up the currency on the 3rd. The nation’s top currency official Masato Kanda has since said Japan will take appropriate steps if excessive moves are seen in currency markets; desirable that currency moves stably, reflecting fundamentals.
“It looks like some stops are being triggered in dollar-yen to push it above Oct. 3 highs,” said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “Thin markets aren’t helping either as the pair trade at a new high for this move.”
Meanwhile, the 10-year US Treasury soared to 4.95% on Wednesday versus 0.85% for its Japanese counterpart. The gap keeps pressure on the yen and fuels speculation the BOJ will to adjust its monetary policy.
Nikkei reported over the weekend that BOJ officials were pondering the question of whether to tweak yield-curve control program as domestic long-term interest rates float higher in tandem with those in the US. It didn’t say where it obtained the information.
“Fundamentally, a program like yield-curve control is messy and there are few good options the longer you let it run,” said CIBC’s Bipan.
--With assistance from Anya Andrianova and Carter Johnson.
(Updates yen prices)