Japan Continues to Highlight Unease Over One Sided Yen Moves - MUFG
Lee Hardman, Currency Analyst at MUFG, notes that the yen has weakened
modestly in the Asian trading session undermined in part by further
verbal intervention from Japanese officials and an improvement in global
investor risk sentiment.
Key Quotes
“More
stable financial market conditions in the near-term remain supportive
for high yielding currencies encouraging carry demand. Commodity
currencies are also being supported by the rebound in the price of crude
oil ahead of the upcoming meeting on Sunday of major oil producers in
Qatar.
The yen has been undermined overnight as well by stronger
verbal intervention from Japanese Finance Minister Aso who stated that
Japan will take “proper action” if there are extreme one-sided FX moves.
He noted that the G20 agreed in Shanghai that extreme FX moves are bad
for economies. It echoes comments over the weekend from Chief Cabinet
Secretary Suga which together are intended to make market participants
more nervous about the risk of direct intervention in the near-term.
The
step up in verbal intervention appears to be having some effect at
least initially by dampening the pace of yen gains. The yen has
strengthened for seven consecutive trading days against the US dollar
highlighting the one sided nature of the price action. It is the longest
number of consecutive days that the yen has strengthened against the US
dollar since October 2011 which occurred just before Japan last
intervened to weaken the yen. However on that occasion the yen was also
significantly overvalued as USD/JPY was trading closer to the
75.00-level.
Comments yesterday from US Treasury Secretary Lew
calling for the IMF to play a more aggressive role in policing exchange
rate fluctuations, global imbalances, and the failures of members to
live up to commitments to boost global demand highlight that Japan are
likely to face international opposition to intervention. He explicitly
stated that FX intervention for competitive advantage in unacceptable.
Overall, we continue to believe that Japan is unlikely to directly
intervene to dampen the yen’s advance unless it strengthens more rapidly
in a disorderly fashion.”
(Market News Provided by FXstreet)
