In the News

Yen’s Six-Day Slump Puts Spotlight on Risk of Japan Intervention

(Bloomberg) -- The yen is on track for its longest losing streak since March and poised to close at a 34-year low, ramping up the risk that Japanese officials will once again step in to prop up the currency.

  • Japanese currency nears weakest point this year versus dollar
  • Officials spent some $62.7 billion supporting yen in April-May

On Thursday, the yen fell for a sixth-straight session, the worst stretch of losses in three months, to trade just shy of 159 per dollar. The Japanese currency’s weakest intraday point of the year, 160.17 per dollar, is within sight. That level, reached in April for the first time in more than three decades, preceded an intervention from policymakers.

The yen weakness comes amid a persistent divergence in yields between Japan and its major peers, including the US. It follows Bank of Japan policymakers declining to lay out details on a reduction in bond buying at the central bank’s June meeting. Without a timeline, traders are left wondering when Japan will normalize its policy, a step that should support the yen. A sharp drop in Chinese bond yields has further weakened the yen, as well as other Asian currencies.

“As long as US-Japan rate differentials exceed a certain threshold, it is possible that yen selling due to carry trades will not decline even with some narrowing of rate differentials,” Barclays strategists led by Shinichiro Kadota wrote in a Thursday note. They now see the dollar-yen pair trading around 160 through the end of the year.

Yen Set for Longest Daily Losing Streak Since March

Japanese currency eyes year-to-date low mark of 160.17 per US dollar

  • Yen Daily Return Versus Dollar

This April and May, Japan’s Ministry of Finance ultimately spent some $62.7 billion supporting the yen in moves that eased some of the pressure on the currency.

The Ministry of Finance is ready to intervene again if it sees a “move as ‘excessive,’ ‘speculative’ and ‘deviated from economic fundamentals,’” wrote JPMorgan strategists Junya Tanase and Ikue Saito, adding the speed of a currency move and its nature, like one driven by speculative yen-selling, “would be the key for the decision on intervention.”

Still, in contrast to the persistent yen weakness earlier this year that led to prior bouts of intervention, officials have appeared more reticent to intervene in recent weeks. Earlier in June, Minister of Finance Shunichi Suzuki, said officials are continuing to watch currency moves but that intervention should be done only on a limited basis.

“I’m more and more convinced that currency officials are giving up on the yen,” said Helen Given, a foreign-exchange trader at Monex. “The yield differential is just too much to overcome right now, and with the US now only eying one cut this year it’s not going to materially improve anytime soon.” 


Reporting by Carter Johnson, George Lei and Anya Andrianova With assistance from Robert Fullem.

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