Early Estimates Suggest Japan Didn’t Buy Yen on Tuesday

Japan likely refrained from intervening in foreign exchange markets to prop up the yen late Tuesday, according to a calculation based on projected central bank figures and estimates by private money brokers.

(Bloomberg) — Japan likely refrained from intervening in foreign exchange markets to prop up the yen late Tuesday, according to a calculation based on projected central bank figures and estimates by private money brokers.

Unlike last year’s massive yen buying operations in September, when there were noticeable discrepancies in Bank of Japan current account figures compared with private sector estimates of government fund flows, the central bank’s initial projections for its balance ahead of a report on Thursday are in line with forecasts. 

The early figures, released Wednesday evening in Tokyo, suggest that Japan didn’t step into markets after it crossed the 150 mark against the dollar. 

Among other possible explanations for the sharp surge that briefly strengthened the currency are a combination of jittery markets and trading algorithms responding to the yen’s slide through the key 150-per-dollar threshold.

A rate check by the central bank or an option-related trade that unsettled markets are among other possible causes, according to Bloomberg Economics’s Taro Kimura.

Senior Japanese officials declined Wednesday to confirm whether they intervened, likely as part of a strategy to keep traders guessing about their actions and bolster their psychological defense against speculators.

 

While analysts said an intervention wouldn’t have been surprising after months of warnings, they largely shared the view that the events on Tuesday didn’t have the same kind of impact the finance ministry made via its series of three interventions last year. Japan’s three forays into the market last year totaled more than $60 billion.

Brokers including Central Tanshi Co. estimated an increase in the BOJ’s current account of around 10 billion yen ($67.2 million) from the government on Thursday, a figure that tallied with the projected figure released by the central bank. Updated figures will be released by the BOJ Thursday morning.

The calculation offers only ballpark figures rather than specific amounts. It projected the size of intervention on Oct. 21 last year at as much as 5.5 trillion yen ($36.9 billion). Official figures released later showed it turned out to be 5.6 trillion yen. 

The yen was at around 148.92 against the dollar Wednesday evening after it hit 150.16 the previous day. The market jump that prompted speculation of intervention took the currency pair as far as 147.43.

The ministry will disclose its total amount of currency intervention for October at the end of this month. More specific details on daily intervention and the currency pairs involved will be announced for this quarter is usually announced around February.

–With assistance from Issei Hazama.

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