Japanese PM intervenes to weaken yen

 
Marion Dakers
JAPAN intervened in the currency market to weaken the yen yesterday, ending a 15-year high and setting the tone for Prime Minister Naoto Kan’s time in office after fending off a leadership challenge on Tuesday.

The dollar jumped to 85 yen from its earlier low of 82.87 immediately after the Bank of Japan, acting for the Finance Department, stepped in to flood the market with the currency for the first time in six years.

Traders cited market estimates that the latest intervention amounted to around 1.5 trillion yen (£11.2bn).

The move helped propel the euro, Australian dollar and sterling sharply higher against the yen, though traders doubted Japan had bought anything other than dollars.

Stock investors cheered the move, sending the Nikkei 225 stock average up by 217.25 points, or 2.3 per cent, to close at 9,516.56.

Currency traders had long speculated on whether Japan would intervene to halt the growing strength of the yen and ease the burden on Japanese exporters.

“If Kan was ever going to intervene it had to be shortly after the election, to make it clear where the leadership stood,” said Simon Derrick, head of currency research at BNY Mellon.


The foreign exchange markets will now watch to see if Japan will repeat the move to keep the yen weak.

“Speculators have been long of yen so there is scope for further yen selling. But there’s scepticism over whether the Japanese can change the trend as fundamentals haven’t altered,” said Beat Siegenthaler, FX strategist at UBS.


JAPAN intervened in the currency market to weaken the yen yesterday, ending a 15-year high and setting the tone for Prime Minister Naoto Kan’s time in office after fending off a leadership challenge on Tuesday.

The dollar jumped to 85 yen from its earlier low of 82.87 immediately after the Bank of Japan, acting for the Finance Department, stepped in to flood the market with the currency for the first time in six years.

Traders cited market estimates that the latest intervention amounted to around 1.5 trillion yen (£11.2bn).

The move helped propel the euro, Australian dollar and sterling sharply higher against the yen, though traders doubted Japan had bought anything other than dollars.

Stock investors cheered the move, sending the Nikkei 225 stock average up by 217.25 points, or 2.3 per cent, to close at 9,516.56.

Currency traders had long speculated on whether Japan would intervene to halt the growing strength of the yen and ease the burden on Japanese exporters.

“If Kan was ever going to intervene it had to be shortly after the election, to make it clear where the leadership stood,” said Simon Derrick, head of currency research at BNY Mellon.

The foreign exchange markets will now watch to see if Japan will repeat the move to keep the yen weak.

“Speculators have been long of yen so there is scope for further yen selling. But there’s scepticism over whether the Japanese can change the trend as fundamentals haven’t altered,” said Beat Siegenthaler, FX strategist at UBS.