SINGAPORE, Aug 3 (Reuters) – The yen surged against the dollar on Monday, putting traders on alert for further intervention by Japanese authorities to shore up the currency, after Tokyo confirmed coordinated yen-buying intervention with the United States last week.
The yen surged more than 1% against the dollar to an intraday high of 155.20, its strongest since early May, having hovered near 40-year lows, pressured by Japan’s low interest rates as higher energy prices hit its terms of trade.
Japan’s finance ministry could not immediately be reached for comment.
COMMENTS:
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:
“The coordinated intervention has materially raised the cost of betting against the yen. It not only caught speculative positioning offside but also increased the risk of follow-up action, which should make investors more cautious about rebuilding aggressive short-yen positions.
“That said, intervention changes market psychology more quickly than it changes fundamentals. Without support from narrower rate differentials or stronger confidence in Japan’s fiscal outlook, the yen could gradually come under pressure again, once official support fades.”
FRANCIS TAN, CHIEF ASIA STRATEGIST, INDOSUEZ WEALTH MANAGEMENT, SINGAPORE:
“It’s hard to know until they declare it … it could also be the market unwinding … because the yen is a really popular funding currency for a lot of trades around the world.
“Central banks, whenever they do any operation, even in this case, a joint operation, credibility is very important because if it’s not credible, it will fail to arrest anything they want to stop … The BOJ wants to increase its credibility by joining hands with the world’s biggest central bank.”
NICK TWIDALE, CHIEF MARKET STRATEGIST, ATFX GLOBAL, SYDNEY:
“They are clearly determined to make a solid effort in strengthening the yen as the billions of dollars they have spent and joint moves have proved.
“However, there will need to be a change in the underlying fundamentals for these moves to be sustainable. The market will challenge these moves once they feel the action has been completed.
“And ultimately we will see much more volatility in the short term because of the Japanese authorities. actions, which of course is in complete contradiction of what they are claiming to do.”
TAKASHI ISHIDA, STRATEGIST, KANSAI MIRAI BANK, OSAKA:
“Japan’s authority broke the silence and has shown its aggressiveness to stem the yen’s weakness. It must be serious about supporting the yen.
“The yen’s momentum will last as long as September or October if the Bank of Japan is to raise interest rates. It looks like the intervention is done with pairs with the BOJ’s rate hikes.”
SIM MOH SIONG, STRATEGIST, OCBC, SINGAPORE:
“It looks like it (an intervention) … it looks like the signal is they will do whatever it takes to stabilise the yen … the position squeeze will kick in once you get below 155, and it looks like it could be the direction that we are heading to trigger more stop-losses and then a further dip in dollar/yen before things start to consolidate.”
HIROFUMI SUZUKI, CHIEF FX STRATEGIST, SMBC, TOKYO:
“It is impossible to know for certain whether intervention actually took place. However, given the magnitude of the move in USD/JPY and its timing, the possibility of intervention cannot be ruled out.
“A substantial build-up of short yen positions had occurred, and the unwinding of these positions tends to accelerate yen appreciation. Market participants are also highly alert to the risk of such a move.
“We expect the yen to remain susceptible to further appreciation in the very near term.”
(Reporting by Asia markets team; Editing by Clarence Fernandez)
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