Kevin Buckland
TOKYO (Reuters) – The yen fell against the dollar on Thursday, reversing direction after a sudden surge that traders and analysts rushed to blame on intervention by Japanese authorities.
The yen was down 0.80% at 155.73 per dollar as of 0537 GMT, reversing about half of its gains Wednesday evening from about 157.55 to exactly 153 in about 30 minutes.
The sharp overnight move came during a quiet period in markets after Wall Street closed and hours after the US Federal Reserve concluded its policy meeting.
The dollar had already fallen as Fed Chairman Jerome Powell reiterated the central bank’s propensity to ease policy, although he reiterated that persistent inflation meant it could take some time for interest rates to be cut.
“It took markets by surprise because it obviously happened during the U.S. session and appeared to be timed for the FOMC to take advantage of a weaker dollar,” said Kyle Rodda, senior financial markets analyst at Capital.com in Melbourne. .
“The ‘stealth attack’ element is actually that the Treasury is trying to punish speculators and issue a warning to sell the yen short,” he said, referring to Japan’s Ministry of Finance (MOF).
Japanese Deputy Finance Minister for International Affairs Masato Kanda, who oversees foreign exchange policy at the Finance Ministry, told Reuters he had no comment on Japan’s intervention in the market.
The dollar has continued to rise more than 10% against the yen this year as traders delay expectations of the timing of the Fed’s first rate cut, while the Bank of Japan has signaled it will move slowly with further policy tightening after its first rate hike. time since 2007 in March.
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The gap between the two countries’ long-term government bond yields is 376 basis points. That helped lift the dollar to a 34-year peak of 160.245 yen on Monday and also triggered a sharp reversal that official data said was due to Japanese intervention totaling about $35 billion.
The Treasury likely intervened in the foreign exchange market to signal that it considers 160 yen per dollar to be its line in the sand, Takatoshi Ito, a Columbia University academic and former Treasury chief, told Reuters on Thursday.
The index, which measures the currency against the yen, euro, pound sterling and three other major currencies, was little changed on Thursday at 105.70, after falling 0.56% on Wednesday from a nearly six-month high.
The euro last bought $1.07175 after rising 0.45% in the previous session.
Sterling gained 0.06% to $1.25345, adding to Wednesday’s 0.28% gain.
As widely expected, the Fed kept rates steady on Wednesday, and Powell stressed that it will “take longer than previously expected” for policymakers to feel confident that inflation will resume falling toward its 2% target. At the same time, he described the risk of further rate hikes as “unlikely.”
“There was a collective sigh of relief in the financial markets after the Fed refrained from increasing its aggressive stance,” said Jack McIntyre, portfolio manager for global bond and related strategies at Brandywine Global.
“Think of this forecast as ‘high for a long time’ rather than ‘high for a long time.’ The latter implies higher rates, but that is not today’s story.”
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The Australian dollar rose 0.23% to $0.6538, jumping 0.8% overnight to $0.6540. The New Zealand dollar was unchanged at $0.5930 after rising 0.7% overnight to $0.5940. [AUD/]