A more than 10% decline against the dollar had traders pondering not if but when Tokyo would intervene to prop up the battered currency.
The answer it seems was at 160 per dollar, a level not seen since April 1990 and briefly breached on Monday. The yen surged to as high as 154.40 on Monday, with traders citing yen-buying intervention. It was back around 157 on Tuesday.
The details are murky and perhaps the confirmation remains some time away as Japan’s top currency diplomat Masato Kanda declined again on Tuesday to comment on whether the finance ministry had intervened to prop up the yen a day earlier.
Kanda, however, said authorities were ready to deal with foreign exchange matters “24 hours” a day.
“Whether it’s London, New York or Wellington, it doesn’t make a difference.”
Ominous perhaps for the yen bears, who have piled on short positions on yen at record levels, with the latest weekly data from the U.S. regulator showing speculators’ largest net short yen position since June 2007.
Tokyo’s move may yet turn out to be futile, analysts say, pointing to the wide yield differential between Japan and the U.S. but as our Breakingviews colleagues argue perhaps there are some merits to intervention.
Traders also await the Federal Reserve’s policy decision, due on Wednesday when the U.S. central bank is expected to keep rates steady but take a hawkish stance after hotter than anticipated inflation reports in March.
No such worries in Europe, with inflation for April expected to stay steady at 2.4%, according to a Reuters poll.
Markets now price in 67 basis points of cuts from European Central Bank this year, compared with 35 basis points of easing expected from the Fed.
In a surprise piece of corporate news, HSBC said its chief executive Noel Quinn will retire. Quinn overhauled the bank in the past five years through a sweeping series of asset sales across the globe.
