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TOKYO/LONDON, Sept 14 (Reuters) – The yen rose over 1% on Wednesday after media reports said the Bank of Japan was conducting interest rate control in apparent preparation for currency intervention, while other majors tried to gain ground they had lost a day earlier on the rising dollar.
The dollar slipped more than 1% to 142.9 yen after the Nikkei website reported the rate check, citing unidentified sources. During a course check, central bank officials call traders and ask the price to buy or sell yen.
Reuters later confirmed the rate check with a market source. Continue reading
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Earlier in the day, the Japanese currency had weakened as low as 144.97 per dollar, extending its sharp fall from the previous day when an unexpected rise in the U.S. consumer price index (CPI) was likely to prompt further aggressive rate hikes from the U.S. federal reserve, sent the Greenback up. Continue reading
The dollar index, which tracks the currency against six major rivals, rose 1.5% on Tuesday, the biggest one-day percentage gain since March 2020.
Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been “rapid and one-sided,” adding that currency intervention to buy the yen is among the government’s options should such moves continue. Continue reading
“If the market continues to sell the yen, there will be more pressure on the (Treasury Department) and the BOJ to tell the market that the recent move was too fast,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management
However, actual intervention to support the currency would be a bigger step.
“Currently, the dollar is strengthening and the yen is weakening due to the large interest rate differential between the United States and Japan, making it difficult (for intervention) to be effective. So I think it’s better to wait,” said Masafumi Yamamoto, chief currency strategist, Mizuho Securities.
“If the dollar rises above 145 yen, the possibility of intervention increases to about 60% from previously 10% to 20% instead of reaching 100%.”
The currency hit a 24-year low of 144.99 last week.
With inflation a minor concern in Japan, the authorities are keeping Japanese government bond yields steady to support the economic recovery.
In contrast, the 2-year Treasury note yield, which typically reflects interest rate expectations, hit 3.804% on Wednesday, its highest level since 2007. The 10-year yield was last seen at 3.4410%.
Financial markets have now fully priced in a rate hike of at least 75 basis points at the close of next week’s Fed monetary policy meeting, with a 30% chance of an outsized full percentage point hike, according to the CME’s Fedwatch tool.
The move followed late-breaking inflation numbers. A day earlier, the probability of a 100 basis point increase was zero.
Other currencies were still ducking after yesterday’s brawl.
The euro managed to climb back above par with the dollar to $1.0014, up 0.47%, but it continued to falter from Tuesday’s 1.5% drop and was not far from 20-years -Last week low removed of $0.9864.
The unveiling of a series of proposals by the European Commission to stem the energy price hikes that have rocked Europe and weakened the euro also gave some support to the common currency. Continue reading
Sterling, down 1.6% on Tuesday, rose 0.43% to $1.1543 after lower fuel prices caused UK inflation to fall unexpectedly in August, figures released on Wednesday showed. Continue reading
The risk-sensitive Aussie was unchanged at $0.67375 after falling 2.26% overnight. Bitcoin, which is also moving in line with investor sentiment towards riskier assets, remained steady at $20,300 after shedding 9.9% on Tuesday.
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Reporting by Kevin Buckland, Rae Wee and Alun John; Edited by Kim Coghill, Edmund Klamann, Toby Chopra and Mark Heinrich
Our standards: The Thomson Reuters Trust Principles.
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