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Japan’s Yen Bounces Briefly After Politician Haruhiko Kuroda’s Comment

The yen gained a brief respite after hitting new two-decade lows on comments from Japanese politicians on Monday, even as the festivities confined the US dollar to tight 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 expressed concern and caused it to bounce as low as 126, 25. But the rally was short lived and was soon back around 126.57.

With the Easter holidays in Australia, Hong Kong and other parts of Asia weakening trade in other currencies, the dollar remained strong and supported by an aggressive Federal Reserve, while the euro was hampered by a lack of clarity on when they would rise. rates in the euro zone. .

At Monday’s low, the yen was nearly 10% weaker than it was in early March. It fell almost 2% against the dollar last week, marking a sixth straight week of losses.

Win Thin, director of currency strategy at BBH Global Currency Strategy, said the dollar appeared to have no significant points on the chart to stop a possible further rally against the yen to a 2002 high near 135.15.

“We see a low risk of FX intervention. Until the BOJ changes its ultra-dovish stance, the monetary policy divergence suggests continued yen weakness and intervention would likely have little lasting impact,” Thin wrote.

Japanese lawmakers have raised concerns about the yen’s decline, particularly after it fell to the weaker side of 125 per dollar on April 11.

While the Bank of Japan is expected to acknowledge mounting inflationary pressures at the upcoming monetary policy review on April 27-28 and do no more, analysts say the yen’s weakness is increasing pressure on Kuroda to amend its policy soon. yield curve control policy and zero rates.

Kuroda made it clear on Monday that while a weak yen could hurt corporate profits, it was premature to discuss any way out of such easy policy.

Japanese Prime Minister Fumio Kishida said on Friday that the central bank’s monetary policy is aimed at achieving its 2% inflation target, not manipulating exchange rates.

Finance Minister Suzuki has spoken several times in recent weeks, warning that a weak yen is “bad” for Japan’s economy if rising raw material costs cannot be passed through to the prices of goods sold.

JPMorgan Securities analysts Benjamin Shatil and Sosuke Nakamura said the use of the word “bad” marked a change in tone.

“We have long argued that the BOJ may need to blink if yen weakness is enough to cause political repercussions,” they wrote on Friday.

“The risk of running short yen will be any capitulation in Kuroda’s so far positive assessment of yen weakness.”

Meanwhile, global supply concerns pushed oil prices higher on Monday. [O/R]adding to the headwinds for Japan’s energy-importing economy.

FALCON FEEDING

The dollar hovered near a two-year high against the euro, supported by incessant hawkish comments from Fed officials.

The euro was stable around $1.08, just below last week’s low of $1.0758, a level not seen since April 2020.

Last month, the Fed delivered the first of what is expected to be a series of interest rate hikes this year and next to bring down 40-year high inflation. New York Fed President John Williams said Thursday that a half-point rate hike next month was “a very reasonable option,” while Cleveland Federal Reserve Bank President Loretta Mester , noted that rates should rise quickly.

Last week, the European Central Bank confirmed plans to end its signature stimulus program in the third quarter, but stressed that there was no clear timetable for when the ECB would start raising rates, and that policy is flexible and can change quickly.

Meanwhile, the Australian dollar hovered around its lowest level in a month at $0.7383.

The bitcoin cryptocurrency continued to straddle the $40,000 mark, last changing hands at $39,748.

(Only the headline and image in this report may have been modified by Business Standard staff; all other content is auto-generated from a syndicated source.)

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