Karen Brettell and Harry Robertson
NEW YORK/LONDON (Reuters) – The yen fell to its lowest level since 1990 on Wednesday before recovering slightly after Japan’s top monetary officials met to discuss the rapidly weakening currency and said they were ready to intervene.
The dollar briefly rose to 151.975 yen, its highest against the yen since mid-1990, and was last down 0.19% at 151.29.
The Bank of Japan, the Ministry of Finance and the Japan Financial Services Agency met late at Tokyo trading hours, after which chief currency diplomat Masato Kanda said he “does not rule out any steps in response to erratic currency movements.”
Japanese authorities have intervened to protect the yen at 151.94 in 2022, and Finance Minister Shunichi Suzuki on Wednesday used the same words that preceded that intervention, warning that Japan would take “decisive steps” against excessive movements in the currency.
“Here they are swimming against the tide to some extent. Intervention helps in the short term, but it is not a long-term solution,” said Bipan Rai, head of North American FX strategy at CIBC Capital Markets in Toronto.
The yen has fallen more than 7% this year due to a widening gap between U.S. and Japanese bond yields, which the Bank of Japan’s modest interest rate hike last week did little to change.
The US Federal Reserve is beginning a cycle of interest rate cuts, and lower government bond yields outside Japan may now be the key to stopping the decline of the Japanese currency.
“I suspect that intervention or threats to intervene are really just a measure to buy time until we start to see things change on a more sustainable basis outside the country,” Rai said.
KING DOLLAR
The dollar is on track for a solid quarterly gain after investors lowered their expectations for significant interest rate cuts in the face of strong economic data and central bank restraint.
Guy Miller, chief market strategist at Zurich Insurance Group, said other currencies were suffering under the weight of the strong U.S. currency.
“The U.S. economy has performed much better than many expected, especially compared to other parts of the world,” Miller said.
Quotes rose 0.11% to 104.40 and are expected to rise about 3% in 2024.
The market’s main focus this week is on US core inflation data due on Good Friday, although an already larger-than-expected jump in US durable goods orders on Tuesday supported the dollar somewhat, putting further pressure on the yen.
The euro fell 0.15% to $1.0814. Sterling weakened 0.07% to $1.262.
The dollar strengthened against the Swedish krona after Sweden’s central bank maintained interest rates and hinted at rate cuts in the coming months. It was last up 0.33% at 10.62 crowns.
On Wednesday, the Swiss franc fell to its lowest level since early November at 0.9071 per dollar. The Swiss currency is still reeling from last week’s surprise rate cut in Switzerland and is down about 7% this year.
In cryptocurrencies, Bitcoin fell 1.15% to $68,987.91.