Japan warned on Thursday against excessive rises in the yen, as the currency hovers near a seven-month high against the dollar on worries about the US economic outlook. The dollar hit a seven-month low of 86.27 yen last week, putting the focus on whether Japanese authorities will increase their warnings on sharp yen gains.
The fall took the dollar close to a 14-year low of 84.82 yen set in November. On Thursday it was around 86.65 yen. "A dollar/yen level of 85 yen is key, but I think few in the market feel there will be intervention even if the dollar falls below it," said Mitsuru Sahara, chief manager for currency derivatives trading at Bank of Tokyo-Mitsubishi UFJ. "Unless the yen rises very rapidly and starts to affect other financial markets, it's hard for authorities to intervene."
Deputy Finance Minister Motohisa Ikeda, asked about the yen's recent strengthening, told reporters: "We have been saying we want to avoid excessive rises in the yen." The greenback slid towards the recent seven-month low versus the yen on Thursday after Federal Reserve Chairman Ben Bernanke expressed concern about the US economy but steered clear of hinting about further easing as some had hoped.
The dollar was trading at around 86.60 yen. Asked about the impact of a stronger yen on the Japanese economy, Ikeda said he would not comment on levels but he felt like French officials do about the weak euro, although he declined to comment further. The deputy finance minister also said he was closely watching the results of the European bank stress tests, adding that global economic developments including Japan and the United States are entering a phase which warrants close watch.
The Committee of European Banking Supervisors (CEBS) has said it will publish results of the tests on the financial health of 91 European banks at 1600 GMT on Friday. Japanese policymakers including Trade Minister Masayuki Naoshima have expressed alarm over the damage a strong yen could inflict on the export-reliant economy.