SINGAPORE: The yen won a brief reprieve after hitting fresh two-decade lows from Japanese policymaker comments on Monday, even as holidays confined the US dollar to narrow ranges against most other currencies.
The yen fell to a two-decade low of 126.795 in early Asian trading, before both Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki voiced concerns and caused it to bounce as far as 126.25. But the rally proved short-lived and it was soon back around 126.57.
With the Easter holiday in Australia, Hong Kong and other parts of Asia dulling trade in other currencies, the dollar remained strong and supported by a hawkish Federal Reserve while the euro was hamstrung by a lack of clarity on when rates in the euro zone would rise.
At Monday’s lows, the yen was nearly 10% weaker than where it was at the beginning of March. It fell nearly 2% against the dollar last week, marking a sixth straight losing week.
Win Thin, head of currency strategy at BBH Global Currency Strategy, said the dollar didn’t seem to have significant chart points halting a potential further run-up against the yen until a 2002 high near 135.15.
“We see low risk of FX intervention. Until the BOJ changes its ultra-dovish stance, the monetary policy divergence argues for continued yen weakness and intervention would likely have little lasting impact,” Thin wrote.
Japanese policymakers have been vocal about their concerns around the falling yen, particularly after it slipped to the weaker side of 125 per dollar on April 11.
While expectations are for the Bank of Japan to acknowledge rising inflationary pressures at the upcoming April 27-28 monetary policy review and not do more, analysts say the weak yen piles pressure on Kuroda to tweak its zero-rates, yield curve control policy soon.
Kuroda made clear on Monday that while a weak yen could impact corporate profits, it was premature to debate any exit from that easy policy.
Japanese Prime Minister Fumio Kishida said on Friday the central bank’s monetary policy is aimed at achieving its 2% inflation target, not at manipulating currency rates.
Finance Minister Suzuki has spoken several times in the past weeks, warning that a weak yen is “bad” for Japan’s economy if rising costs of raw materials cannot be passed onto prices of goods sold.
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