Japan’s top currency official provided a modest boost to the yen on Friday, indicating heightened scrutiny of market movements following the currency’s dip into the 150 range against the dollar. Atsushi Mimura, the vice finance minister for international affairs, stated, “Currently, we are witnessing slightly one-sided and sudden movements in the currency market. We will monitor the forex market with a strong sense of urgency, especially regarding any speculative activity.”
Mimura’s comments came after the yen fell to a low of 150.32 against the dollar, driven by robust US retail sales and labor market data that diminished expectations for the Federal Reserve’s interest rate cuts. His remarks helped the yen rebound slightly, with it briefly trading at 149.88 against the dollar.
Although Mimura did not indicate any immediate action from Japan, his statements highlighted the 150 range as a critical zone for observation. This year, Japan has already spent over $100 billion intervening in foreign exchange markets to support the yen, with the last intervention believed to have occurred on July 12, when the currency was around 158.76.
The future trajectory of the yen will largely depend on interest rate expectations in both the US and Japan over the coming months. Continued signs of a robust US economy could exert further downward pressure on the yen by tempering outlooks on the pace of Fed actions.
Additionally, uncertainties surrounding the upcoming elections in both the US and Japan will further complicate the market landscape.
The Bank of Japan (BOJ) has already contributed to global market volatility with its second rate hike this year in July, a move that is likely to foster caution regarding its future decisions. The central bank is expected to maintain its current rate at its upcoming meeting in October, with the ongoing general election campaign also influencing this stance.
Economists predict that the BOJ may take its next action in December or January, a potential hike that could lend support to the yen. A former BOJ official recently suggested that if the yen hovers around the 150 mark, the bank might choose to act sooner rather than later.
Related topics:
