On Monday, the yen reached the closely watched 150 per dollar barrier, keeping speculators on the lookout for intervention after the Bank of Japan and Governor Kazuo Ueda crushed prospects of any fast shift away from its harsh ultra-loose monetary policy.
In the global currency market, the dollar was on the offensive, extending its gains from last week after a still-hawkish Federal Reserve startled investors by signaling that interest rates in the United States would need to remain higher for longer than previously anticipated.
The yen JPY=EBS plummeted to a more than 10-month low of 148.49 per dollar and remained within striking distance of 150, a level that some market observers considered as a line in the sand that would prompt similar forex intervention from Japanese authorities as last year.
The Japanese yen fell more than 0.5% on Friday as the BOJ maintained ultra-low interest rates and maintained its dovish attitude, with Governor Ueda emphasizing the importance of spending more time analyzing data before raising interest rates.
“I don’t think the level is that important and will serve as the trigger (for intervention).” I believe that the rate of change is more important… But, given the warnings from Japanese officials, I believe the risk of a currency intervention has increased,” said Carol Kong, a currency analyst at Commonwealth Bank of Australia.
“There is also a greater likelihood of a coordinated intervention simply because U.S. Treasury Secretary (Janet) Yellen made some remarks the other day that essentially gave the green light to a BOJ intervention.”
Yellen stated last week that whether Washington would show understanding over another Japanese yen-buying intervention “depends on the details” of the scenario.
In other news, the euro EUR=EBS rose 0.04% to $1.0649 after falling to a six-month low of $1.0615 against a stronger dollar on Friday.
The euro was on course to lose 1.8% for the month, its biggest monthly drop since May.
Sterling GBP remained stable at $1.2244, after falling more than 1% last week as a result of the Bank of England’s decision to suspend its rate-hike cycle, which came a day after data showed Britain’s high inflation rate unexpectedly eased.
The pound was on course to plummet by more than 3% in September, its worst monthly performance in a year.
“Central banks in the United Kingdom, the Eurozone, and Japan have ‘turned tail.'” “They’re now putting to the test the hypothesis that their slowing economies portend the defeat of the inflation impulse, or that the slowdowns are severe enough that they don’t want to tempt fate with more tightening,” said Thierry Wizman, Macquarie’s global FX and interest rates strategist.
“And because the United States has yet to exhibit the growth infirmities that the rest of the world has, the United States stands apart, and the Fed has signaled that it can tempt fate.”
Fed officials warned of further rate hikes on Friday, despite the central bank’s decision to put rates on hold at last week’s policy meeting, with markets now pricing in a roughly 21% likelihood of a 25-basis-point increase at the November meeting. FEDWATCH.
The dollar index =USD, which hit a six-month high on Friday, rose to 105.57 in early Asian trade.
The Australian dollar AUD increased by 0.06% to $0.6445, while the New Zealand dollar NZD declined by 0.05% to $0.5958 after reaching a three-week high of $0.6001 earlier in the session.
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