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LONDON, Oct 3 (Reuters) - Japan’s yen rose sharply against the dollar on Tuesday, causing market confusion over whether there had been an official Japanese intervention, or whether the move was caused by traders repositioning after a break of the 150 level.
The yen strengthened to as much as 147.30 yen in minutes after breaking through 150 yen to the dollar for the first time in a year.
The 150 level is one that many traders suspect could mark the point at which Japanese authorities, who have reiterated their concern about excessive volatility and currency weakness, could intervene.
The Japanese Ministry of Finance and the Bank of Japan were not immediately available for comment. The New York Federal Reserve did not respond to requests for comment.
MARKET REACTION:
The dollar was last down 0.56 per cent against the yen at 149.09 by 12:28 PM ET, having hit a session high of 150.165 earlier.
COMMENTS:
JONAS GOLTERMANN, DEPUTY CHIEF MARKETS ECONOMIST, CAPITAL ECONOMICS, LONDON:
“Japan’s Ministry of Finance may have intervened in support of the yen today after the USD/JPY rate rose through the symbolic 150 level… The Ministry has the firepower to continue intervening, but ultimately the direction of the currency will be determined by what happens to interest rate differentials.”
“It is also possible that market participants jumped the gun as the USD/JPY rate rose above 150 and/or that the BoJ conducted a ‘rate check’ – requesting quotes from dealer banks, an immediate prelude to actual intervention.”
“Last year’s intervention at 145 kept the USD/JPY rate in check for a few weeks but, as Treasury yields rose, that level gave way.”
EDWARD MOYA, SENIOR MARKET ANALYST, THE AMERICAS, OANDA, NEW YORK:
“The FX market was dealt a surprise after Japanese officials likely intervened after a hot JOLTS report sent dollar-yen above the 150 level. The other scenario, albeit unlikely, is that the dollar rally triggered a massive stop.”
“The two big levels that every FX trader had their eyes on were USD/JPY at 150 and 155. With NFP payrolls around the corner, some traders thought intervention would most likely wait until later in the week. The timing of this intervention will unlikely be confirmed in the NY session as it is very late in Tokyo.”
“The Ministry of Finance releases official intervention data at the end of the month, but we should not be surprised if they have a press event or if a key official comes out with a comment early in Asia. The Ministry of Finance will want to confirm the action and send a strong signal that they are not done with their intervention efforts.”
OLIN ASHER, SENIOR ECONOMIST AT MIZUHO, LONDON
“It looks like intervention though there isn’t any official confirmation and the backdrop is not fully convincing.”
“You can say a couple of things: if you just look at the run up in USD/JPY this year vs last year, its slower. Also the past month has been more about USD strength (as UST yields have surged) than JPY weakness, so intervention will have less chance of success.”
“The two large interventions last year saw USD/JPY move almost 5 big figures. If this was intervention it looks small, at least relative to last year.”
“The finance minister has been quite explicit that he has been looking more at volatility and the speed of any moves rather than levels…so it could just be people expecting intervention and then reacting to what they believed to be intervention. That said, it’s quite rare for a currency to move so aggressively in such a short amount of time without some reason. Such a move is usually intervention.”
HELEN GIVEN, FX TRADER, MONEX USA, WASHINGTON:
“I don’t think (it was intervention)”
“To keep in mind, this move in the last 10 minutes just brings USD-JPY pricing back to where it touched Friday afternoon.”
“BoJ Governor Ueda said pretty firmly that he would be looking for a more sustained period of strong economic readings before a policy change is considered, so I do see this as more of an indicative pricing of future intervention. “
“I don’t think ‘watching FX moves with a high sense of urgency’ would correspond to an out-of-schedule action at 11PM local time, but I do think all signs point to change at the next meeting.”
MICHAEL BROWN, MARKET ANALYST, TRADER X, LONDON:
“It has all the hallmarks of intervention in all honesty, it would have to be an incredibly coincidence for it not to be as we see a 3 big figure fall the second we cross above the 150 handle, which the Japanese authorities have marked out now as a line in the sand.”
“Big question now is whether markets test the MoF’s mettle and rally back to 150, I think they probably will, at which point we’ll see whether another intervention round comes in. It’s tough to see any reason for this other than a macroeconomic one, given that volatility is relatively subdued – or was before that lurch lower.”
JAMES ROSSITER, HEAD OF GLOBAL MACRO STRATEGY, TD SECURITIES, LONDON:
“It quacks like a duck but I don’t think it is a duck. We are not seeing forceful moves. The level 150 is a pin-point for officials. Some investors may be jumping in before the Bank of Japan does and there may be stop-loss triggers being hit as well. But, it’s minute to minute at the moment, so let’s see what happens.”
KENNETH BROUX, HEAD OF CORPORATE RESEARCH FX AND RATES, SOCIETE GENERALE, LONDON:
“I think this is not intervention. The process is that they would they would check rates first. What makes sense is that there are a lot of options structures that have barriers at 150 – as that was such a psychological barrier, and so when you trade 150, as we did, those barriers get triggered and invalidated or validated and we are seeing flows on the back of that.”
JEREMY STRETCH, HEAD OF G10 FX STRATEGY, CIBC CAPITAL MARKETS, LONDON:
“I’m not sure it’s them (the BOJ) but the jury is out.”
“We broke the (150) level which got people a little bit nervous. One of our traders thinks it was a bit of price checking rather than explicit action for now but it’s unclear.”
“Some people might think this was a shot across the bows from the BOJ.”
NIELS CHRISTENSEN, CHIEF ANALYST, NORDEA, COPENHAGEN:
“The market is obviously very nervous around these levels at 150. For me, it’s nervousness with traders cutting their long positions.”
“I imagine if this was intervention then they would confirm it to make the most of it. They would follow it up with more to really wash out the long dollar-yen positions.”
