The yen yesterday rose against the US dollar after Japanese Minister of Finance Satsuki Katayama said Tokyo would not rule out any options to counter weakness in the local currency, including coordinated intervention with the US.
The yen slid to a year-and-a-half low earlier in the week. It was last up 0.3 percent to ￥158.13, but still set for a third consecutive week of declines against the greenback.
The dollar index, which measures the greenback against a basket of peers, was poised for a third consecutive weekly gain after positive US economic data pushed out expectations for rate cuts by the US Federal Reserve.
Photo: Reuters
Katayama said a joint statement signed with the US in September last year “was extremely significant and included language on intervention.”
Markets in Japan are on edge before a pivotal week that would see Japanese Prime Minister Sanae Takaichi dissolve parliament to set up a snap election while the central bank meets on policy.
Some Bank of Japan policymakers see scope to raise interest rates sooner than markets expect to contend with the weak yen, sources said.
The Japanese currency has fallen this week on expectations that fiscally dovish Takaichi might have greater leeway to introduce more stimulus pending the snap election expected early next month.
“Lower house dissolution reports are fuelling JPY [Japanese yen] depreciation pressure and we have further extended our long USD/JPY target, but potential intervention risk could cap the upside,” said Shinichiro Kadota, head of Japan forex and rates strategy at Barclays Tokyo.
Barclays said in a note that Japan’s Liberal Democratic Party might be in for a tight race, as the opposition strengthens its coordination and monetary policy could change depending not only on election results, but also on forex reactions.
The dollar index’s rally paused yesterday, with the currency edging 0.07 percent lower at 99.28, but still on track for a 0.15 percent advance this week.
The US dollar rose on Thursday after data showed US weekly jobless claims unexpectedly fell, likely reflecting challenges adjusting data for seasonal fluctuations.
Fed funds futures have pushed back expectations for the next rate cut to June on the back of improving employment data and as central bank policymakers expressed concern about inflation.
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