Yen steadies a bit after likely intervention by Bank of Japan in currency market

30 Apr 2024 , 09:14 AM

On Tuesday, the yen steadied a bit against the dollar following some appreciation the previous day. This has been attributed by traders to likely intervention by Bank of Japan in the currency market.

The Japanese currency experienced a slight dip of 0.16%, trading at 156.56 per dollar, a notable shift from its 34-year low of 160.245 reached on Monday. Traders suggest that the yen-buying intervention by Tokyo led to a substantial rebound of nearly six yen.

While Japanese authorities have not officially confirmed their intervention in the currency market, the possibility remains, keeping markets vigilant ahead of the Federal Reserve’s monetary policy review this week.

Masato Kanda, Japan’s top currency diplomat, reiterated on Tuesday that authorities are prepared to address foreign exchange matters around the clock but refrained from commenting on any specific interventions by the finance ministry.

Trading in Asia experienced lower volumes than usual on Monday due to Japan’s Golden Week holiday, coinciding with the yen’s significant gains against the dollar. Confirmation of any intervention is not expected until late May, with official data releases delayed.

Japan’s markets will observe another closure on Friday for the holiday, further impacting trading activity.

Despite the recent rebound, the Japanese currency remains lower than pre-Bank of Japan (BOJ) policy announcement levels from last week. The BOJ’s cautious approach to interest rate hikes, coupled with the potential for U.S. rates to remain relatively high amidst persistent inflation, could continue to pressure the yen downward.

The fragile state of Japan’s economic recovery also limits the BOJ’s policy options, as overly tight measures could risk pushing the country into recession. March data indicated a better-than-expected 3.8% increase in factory output but fell short of market forecasts for retail sales.

Ahead of the Fed’s meeting, the dollar stabilized around 105.73 against a basket of currencies after a slight decline in the previous session. Traders have adjusted expectations for Fed rate cuts amid robust U.S. economic data and persistent inflation figures.

Meanwhile, the European Central Bank (ECB) and the Bank of England may consider rate cuts in the near term, providing further insights into global monetary policy shifts.

European inflation data due later in the week could offer additional cues on the ECB’s rate trajectory. The euro remained relatively steady at $1.0714, while sterling saw minor fluctuations, trading at $1.2558.

In the cryptocurrency market, bitcoin experienced a modest increase, rising by 1.74% to $64,039.00.