Dollar sinks against yen, BOJ intervention suspected ahead of weekend

Dollar sinks against yen, BOJ intervention suspected ahead of weekend

NEW YORK, Oct 21 (Reuters) – The U.S. dollar tumbled against the yen on Friday, posting its biggest daily decline against the Japanese currency in more than two months, as traders and strategists said Japanese authorities could be in the market to stem a fall their battered currency.

The yen hit 144.5 to the dollar on Friday, before paring its gains to trade down around 1.4% at 148.195, its biggest daily jump since Aug. 10.

“I think it’s an intervention,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

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“We see a lot of dollars selling off and the yen moving almost vertically as the shorts tighten,” he said.

The Japanese government and the Bank of Japan have intervened to buy yen and sell dollars in the foreign exchange market, the Nikkei newspaper said on Saturday, citing a source.

Japan’s finance ministry declined to comment on the matter.

“It’s very clearly the Department of Finance stepping in to sell dollar-yen,” said Mazen Issa, senior FX strategist at TD Securities in New York.

“They are trying to strongly defend their very easy policy,” he said.

“A lot of people looked at 150 as a key level that they would see some kind of intervention, and they let it go to 152, and then the timing of their intervention came at a very illiquid time, basically, like London was about to go home for the weekend, and it looks like it’s designed to inflict as much pain as possible on speculators, they like to use that term,” Issa said.

Earlier on Friday, Japanese Finance Minister Shunichi Suzuki said authorities were dealing “strictly” with currency speculators, while Bank of Japan Governor Haruhiko Kuroda said the central bank would closely monitor the situation. impact of currency movements.

With Friday’s gains, the yen was on track to break a nine-week streak of weekly losses against the greenback.

The dollar index, which measures the strength of the greenback against a basket of currencies, was down 0.7% at 112.17, down from a three-week high of 113.95, hit during the session.

The greenback came under pressure after a report said some Fed officials signaled greater unease over steep interest rate hikes to fight inflation, even as they lined up another big rate hike for November.

The Wall Street Journal reported that Fed officials were heading for another 0.75 percentage point interest rate hike at their November meeting, as some policymakers began signaling a desire to slow down soon. the rate of increases.

Fed officials will then likely debate whether and how to signal plans to approve a lower increase in December, the report said.

The dollar has risen sharply this year, helped by the Federal Reserve’s hawkish stance and strong demand for safe havens amid continued uncertainty about the outlook for the inflation-plagued global economy.

Despite its pullback in Fed headlines, the dollar index remains near a two-decade high.

“It’s really hard to bet against the fact that the Fed will have to continue to be quite aggressive in its approach going forward,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets.

“That ultimately means we still see the dollar rising,” Rai said.

Dollar weakness helped push the pound up 0.2% to $1.1261, even as the outlook for the pound remained murky as Britain’s ruling Conservative Party set to choose the the country’s third prime minister in two months after Liz Truss stepped down on Thursday.

The currency jumped 1% the previous day after Truss announced his departure.

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Reporting by Saqib Iqbal Ahmed; Additional reporting by John McCrank and Dhara Ranasinghe; Editing by David Gregorio, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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