Japan’s chief currency official yesterday sent a warning on recent foreign exchange moves, after the yen weakened against the US dollar following Friday last week’s Bank of Japan (BOJ) decision.
“We’re seeing one-directional, sudden moves especially after last week’s monetary policy meeting, so I’m deeply concerned,” Japanese Vice Finance Minister for International Affairs Atsushi Mimura told reporters. “We’d like to take appropriate responses against excessive moves.”
The central bank on Friday raised its benchmark interest rate to the highest in 30 years, but Bank of Japan Governor Kazuo Ueda chose to keep his options open rather than bolster the yen, delivering a cautious rate hike that left the currency sliding toward levels which have triggered intervention in the past.
Photo: Reuters
The yen had weakened to as much as 157.78 per US dollar at the weekend, suggesting investors were disappointed that the BOJ did not signal a stronger intention to keep hiking rates.
After Mimura’s comments yesterday, the yen strengthened to as much as 157.51 to the greenback. With analysts broadly expecting the Japanese central bank to hold off on its next hike for another six months or so, the Japanese Ministry of Finance might have to intervene in the currency markets should the yen keep weakening toward the 160 level against the US dollar.
Meanwhile, Japan’s benchmark 10-year yield climbed to a level unseen since February 1999. The two-year yield, which is sensitive to monetary policy expectations, rose to the highest since 1997.
“The sharp yen depreciation is seen as a factor pushing up yields, as it has fueled speculation that the timing of the next rate hike may be brought forward,” Mitsubishi UFJ Morgan Stanley Securities Co senior fixed-income strategist Keisuke Tsuruta said.
He added that yields are expected to remain elevated “given the market conditions after the BOJ meeting and lingering fiscal concerns.”
Elsewhere, precious metals rallied, with their haven appeal boosted by geopolitical tensions and expectations of more US Federal Reserve’s rate cuts. Looser monetary policy typically is a tailwind for gold and silver, which do not pay interest.
Spot gold strengthened more than 1.5 percent to surpass the previous record of US$4,381 an ounce set in October. Silver also climbed to a record and platinum advanced for an eighth straight session.
Copper approached US$12,000 a tonne at the tail end of a momentous year dominated by trade turmoil, tight supply and optimism for long-term demand. The metal is on track for its biggest annual gain since 2009.
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