(Bloomberg) — The yen remained under pressure and within a whisker of key levels against the dollar Monday, even as Japan’s top currency official warned that authorities stand ready to intervene in currency markets 24 hours a day if necessary.
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“If there are excessive currency fluctuations, it has a negative impact on the national economy,” said Vice Finance Minister Masato Kanda. “In the event of excessive moves based on speculation, we are prepared to take appropriate action.”
Kanda was speaking as the yen hovered near the psychological level of 160 to dollar and the weak point of 160.17 set on April 29, when Japan is thought to have waded into the market. The yen traded little changed 159.81 at 9:59 a.m. in Tokyo, which leaves it near the weakest level in about 34 years.
Japan has acknowledged that it spent ¥9.8 trillion ($61.3 billion) intervening in currency markets during a month-long period between April 26 and May 29. Authorities didn’t specify dates for the Bank of Japan action ordered by the government, but trading patterns indicate there were two major rounds of intervention on April 29 and May 1. Foreign reserves data indicate that Japan likely sold Treasuries to help fund that action.
“We suspect, the next round of BOJ intervention is likely to come after USD/JPY triggers buy orders perched above the late April 160.20ish high,” wrote Tony Sycamore, market analyst at IG Australia. He said the yen’s decline against the dollar last week was driven by stronger-than-expected US purchasing managers index data and the BOJ’s reluctance to provide a detailed plan around its reduction of bond purchases.
The BOJ could make more sizable cuts in bond buying after checking the view of market participants, one member of the policy board said at this month’s meeting, according to a summary of opinions issued Monday. One member said the BOJ needs to consider further adjustment of monetary easing as there are upside risks for inflation.
Global authorities are in touch with each other on a daily basis on a wide range of issues including currencies, Kanda said. The market is paying attention to currency levels and there’s a strong sense of caution about foreign exchange intervention, the Japanese official said.
Kanda said his counterparts in Washington don’t have a problem with Japan’s intervention. “The most important thing for them is transparency,” he said. Kanda said a decision by the US to add Japan to its currency watchlist had no impact on Japan’s currency strategy.
(Updates with chart and analyst comment)
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