(Bloomberg) – Japan’s top currency official warned on Friday that he was watching the market closely after the yen fell to the 150 yen level against the dollar overnight, contributing to a slight rise in the yen.
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Atsushi Mimura, Vice Minister of Finance (in charge of international affairs), said, “Currently, we are seeing somewhat unilateral and sudden movements in the foreign exchange market.'' “We will continue to monitor the foreign exchange market with a high degree of nervousness, including speculative movements,'' he said.
The comments came as better-than-expected U.S. retail sales and labor market data weighed on hopes for the pace of Fed interest rate cuts, with the yen dropping to 150.32 yen against the dollar overnight. This was a statement made in response to the decline in prices.
Following Mr. Mimura's remarks, the yen returned to the 150 yen level to the dollar, and at one point reached 149.88 yen to the dollar.
The comments do not suggest any action from Japan so far, but they do help position the 150-degree range as a zone worth watching closely.
Japan has already spent more than $100 billion in foreign exchange market intervention this year to support the yen. It is believed to have last entered the market on July 12th, when it was around 158.76.
Currency movements will depend on interest rate expectations in the United States and Japan in the coming months. Further signs that the U.S. economy is stronger than expected would weaken views on the pace of Fed action and put downward pressure on the yen.
Meanwhile, uncertainties related to the US and Japanese elections will continue to complicate the outlook for market participants.
After the Bank of Japan raised interest rates for the second time this year in July, triggering a global market meltdown, this is a factor likely to spur caution over its next move. The central bank is widely expected to keep interest rates on hold at its October meeting, with the country's general election campaign also a factor behind keeping rates on hold.
Economists expect the Bank of Japan's next move in December or January to be a rate hike that would provide some support for the yen. A former BOJ official recently suggested that if the currency were in the 150 yen range, the BOJ would choose to act sooner rather than later.
–With assistance from Yuko Takeo.
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