Yen slides previous key 150 degree, markets brace for intervention By Reuters

By Leika Kihara and Kantaro Komiya

TOKYO (Reuters) – The yen tumbled previous the important thing psychological degree of 150 to the greenback on Thursday for the primary time since 1990, defying Japanese policymakers’ repeated threats of intervention to deal with extreme forex market volatility.

The greenback/yen’s break above the important thing milestone heightens strain for Tokyo to step into the forex market once more to rein within the Japanese unit’s relentless decline.

Earlier within the day, Japanese Finance Minister Shunichi Suzuki vowed to take “acceptable steps” towards extreme forex market volatility.

“It is a large psychological degree that would set off intervention … folks have been anticipating intervention for some time,” Moh Siong Sum, forex strategist at Financial institution of Singapore, mentioned of the yen’s 150 to the greenback threshold.

“150 and individuals are going to look over their shoulders for some time and see whether or not there’s any motion or not, if not, they are going to push it additional, larger. That is how the market goes. The following resistance I see can be round 153 degree.”

The Financial institution of Japan, for its half, ramped up efforts to defend its 0% bond yield cap earlier on Thursday with provides of emergency bond shopping for, in a present of resolve to take care of the ultra-low rate of interest coverage that’s blamed for pushing down the yen.

The central financial institution’s step underscores the dilemma Tokyo faces in making an attempt to include unwelcome yen falls, with out resorting to rate of interest hikes that would derail Japan’s fragile restoration.

“Current speedy and one-sided yen declines are undesirable. We completely can’t tolerate excessively risky strikes pushed by speculative buying and selling,” Suzuki advised parliament on Thursday.

“We are going to proceed to take acceptable steps towards extra volatility, whereas watching forex market developments with a robust sense of urgency,” he mentioned.

The Ministry of Finance, which holds jurisdiction over forex coverage, spent 2.8 trillion yen ($19 billion) in dollar-selling, yen-buying intervention final month when authorities acted within the markets to prop up the yen for the primary time since 1998.

The yen tumbled under 150 towards the greenback on Thursday, its weakest since August 1990, protecting traders on excessive alert to the potential for one other Japanese intervention within the forex market. It final traded at 149.770.

Japanese policymakers have signalled that they have been watching the velocity of yen strikes, quite than goal a selected degree, in deciding whether or not to intervene.

BOJ Governor Haruhiko Kuroda on Wednesday dominated out the possibility of elevating the financial institution’s ultra-low rates of interest to average the yen’s downtrend, at the same time as he warned that sharp yen strikes would damage the financial system.

Whereas market worries about intervention have saved the tempo of yen falls pretty gradual, analysts anticipate the forex to stay on a downtrend so long as the BOJ stays a dovish outlier amongst a world wave of central banks mountain climbing charges.

The BOJ faces renewed challenges in protecting long-term rates of interest stably low with its coverage dubbed yield curve management (YCC), underneath which it pumps cash aggressively to cap the 10-year bond yield round 0%.

The central financial institution performed emergency bond-buying operations on Thursday, as rising international yields pushed the 10-year Japanese authorities bond (JGB) yield above its implicit 0.25% cap for the second straight day.

“The BOJ doubtless despatched a message to markets, which is having some impact,” mentioned Shinsuke Kajita, chief strategist at Resona Holdings in Tokyo. “But it surely’s onerous to maintain JGB yields from rising, given very sturdy upward strain from abroad.”

The BOJ is extensively anticipated to take care of its huge stimulus programme at its subsequent two-day coverage assembly ending Oct. 28.

As soon as welcomed for the aggressive enhance it offers exports, the weak yen has develop into a headache for policymakers because it inflates the prices of already costly imported gasoline and uncooked supplies.

($1 = 149.8700 yen)