Stay informed with free updates
Simply sign up to the Currencies myFT Digest — delivered directly to your inbox.
The dollar jumped to a new 34-year high against the yen in early Thursday trading in Tokyo, briefly pushing the Japanese currency through what was considered a key line of support and reviving market speculation that the authorities in Tokyo might attempt to intervene.
The dollar strengthened above ¥153 against the dollar for the first time since mid-1990 — a line that some analysts had previously warned could represent a “line in the sand” and draw direct intervention by Japan.
Shortly after the move, Japan’s vice-finance minister for international affairs, Masato Kanda, told reporters that authorities would not rule out any measures to address excessive moves in the exchange rate.
But while he said that the recent moves had been “rapid”, Kanda stopped short of declaring the latest move “excessive”, in what two Tokyo-based traders said could be seen as a sign that the intervention risk had not changed significantly.
“I do not have any particular [exchange rate] level in mind but excessive volatility has a negative impact on the economy,” said Kanda.
The dollar’s latest move against the yen followed stronger-than-expected data for US inflation in March, which pushed out market expectations for the timing of US interest rate cuts and sent bond yields and the dollar leaping.
The yen has traded close to the ¥153 line in recent weeks, prompting comments from the Japanese authorities that analysts have interpreted as the highest level of verbal intervention.
Japan directly stepped into the markets on three occasions in 2022, buying yen to stabilise the Japanese currency as it weakened towards ¥152 to the dollar.
Traders in Tokyo said that with markets now betting that a US interest rate cut will not come before at least September, the large difference in rates between the US and Japan was set to persistent downward pressure on the yen.
Japan ended eight years of negative interest rates in March when it raised the overnight interest rate to a range of zero to 0.1 per cent, but rates are expected to remain low for some time.
Currency analysts said Tokyo markets would be alert for signs that the Japan’s ministry of finance was conducting a “rate check”, where officials check the yen price offered by traders as a precursor to a possible official currency intervention.
But Benjamin Shatil, a foreign exchange analyst at JPMorgan in Tokyo, said Japanese officials would be keen to avoid looking as if they were defending a line. “We might see the dollar-yen pair testing fresh highs before prompting an official response,” he said.
Shatil said shorting the yen to invest in higher yielding currencies including the dollar remained a popular trade.
“Given the paring back of Fed cuts this year, there is a widespread perception among macro investors that intervention will merely serve to slow down, not arrest, yen depreciation,” added Shatil.
Others questioned any value for Japanese officials in intervening on a day when currency moves were driven by broad dollar strength rather than factors specific to Japan.
On Wednesday the dollar gained just over 1 per cent against a basket of currencies, including the yen, for its best one-day performance in more than a year.
“Japanese officials have warned that ‘speculative’ moves were impacting and threatened intervention. But the hefty dollar-yen jump suggests dollar strength will not be fought currently,” said analysts at Action Economics.
