Weakness in the yen is broadening with a trade-weighted gauge of the currency falling to the lowest in more than two decades as officials in Tokyo issue more warnings about sharp moves.
(Bloomberg) — Weakness in the yen is broadening with a trade-weighted gauge of the currency falling to the lowest in more than two decades as officials in Tokyo issue more warnings about sharp moves.
Deutsche Bank AG’s measure of the yen’s strength versus its global trading peers closed at a record low Monday, according to data going back to 2000. The currency has found itself caught once more in the widening gap between the Bank of Japan’s super-easy monetary policy and the hawkish shift seen in counterparts in Europe and the US.
The move will add to expectations of at least more verbal intervention to help stabilize the currency, which has fallen by more than 7% this year against the dollar and 9% against the euro.
Japan’s finance minister Shunichi Suzuki said Tuesday he continues to closely watch moves and will take appropriate action on foreign-exchange policy as necessary. Later, economy minister Yasutoshi Nishimura warned that officials were watching out for any excessive or speculative moves in the market.
The yen pared a modest decline to edge higher to around the 141.70 per dollar level in Tokyo trading, just off a seven-month low against the greenback.
“Actual intervention is unlikely now but risks may become more real when it drops beyond 145 and 150 at a fast pace,” said Tsutomu Soma, a bond and currency trader at Monex Inc. in Tokyo. “The European currency crosses look most bullish versus the yen.”
The yen is down against every G-10 peer so far in June, thanks to the stark contrast between the BOJ and peers. Last week, the Federal Reserve signaled it may resume tightening after a June pause, the European Central Bank hiked and suggested more is likely in July, while traders expect the Bank of England to lift rates on Thursday.
In contrast, the BOJ kept a dovish tone, a move strategists said opened up the door for a further slide in the currency.
Last year, the yen weakening toward 146 per dollar triggered Japan’s first intervention to prop up the currency since 1998, though in the build up to that there were repeated official warnings about direct action.
–With assistance from Erica Yokoyama and Yoshiaki Nohara.
(Updates with Nishimura comments)
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