The yen was rapidly bought back during today’s New York session, sending dollar-yen down into the ¥156 range. Market concern increased following reports that the BOJ had conducted a rate check.
The yen was rapidly bought back in the foreign exchange market during the New York session, sending dollar-yen down into the ¥156 range. The BOJ policy meeting did not prompt the strongly hawkish reaction expected by the market, and the rebound in yen selling intensified. Dollar-yen rose into the ¥158 range at one point before falling rapidly. Following reports that the BOJ had conducted a rate check, some market participants viewed the authorities’ rate check as a warning signal directed at speculative yen selling.
The Fed adopted a more hawkish stance than expected at this week’s FOMC and signaled the possibility of additional rate hikes. This led the market to focus on the BOJ’s lagging pace of tightening, bringing back the risk that dollar-yen could once again target ¥160. At the same time, reports of the BOJ’s rate check heightened concern about yen-buying intervention against the backdrop of thin trading during Japan’s extended holiday period.
Structural factors behind yen weakness, including the US-Japan interest-rate differential and concerns over Japan’s fiscal position, remain entrenched. Some market participants believe that any yen appreciation resulting from a one-off intervention could prove temporary.
Euro-dollar continued to trade in the ¥1.14 range, while euro-yen at one point fell from the ¥181 range into the ¥179 range. Expectations for ECB rate hikes and developments in the UK are also in focus for the market.
Some market participants say that the factors behind yen weakness are complex, making it difficult to anticipate a trend reversal based solely on short-term movements.