Yen jumps in ‘jittery’ trading after hitting 160 against US dollar

Résumé détaillé

The yen rebounded after briefly breaching 160 per dollar, sparking speculation of potential intervention by Japanese policymakers to defend the currency.

The yen breached the closely watched 160-per-dollar level for the first time since September, only to rebound on speculation that a deeper slide would cause policymakers in Japan to swoop in again to defend the currency.

After dropping as much as 0.2% as spiking US bond yields pushed up the dollar, the currency ended the session down less than 0.1% at 159.88 per US dollar.

The 160 level had been viewed by some market participants as a potential trigger for intervention by Japanese authorities, who earlier this year acted to support the currency in coordination with US officials.

Japan’s chief currency official Atsushi Mimura on Thursday said he has a strong impression that the currency’s moves over the past few days have been “too fast” — and reminded investors of the currency-market intervention a few months ago, when the yen hit a 40-year low of nearly 164 to the dollar.

While government officials have emphasised it’s the speed and disorderliness of currency moves rather than any specific level that triggers intervention, a sustained breach of 160 has the potential to test their tolerance.

“Markets are jittery about potential FX intervention whenever we approach the 160 area,” said Win Thin, chief economist at Bank of Nassau 1982.

Tokyo and Washington in late July conducted a historic joint intervention to support the yen, raising risks for those betting against the yen. The Asian nation intervened in the currency market three times over the summer to prop up the yen, spending a total of ¥15.4 trillion ($96.4 billion) over the period.

To Howard Du, a strategist at TD Securities, said further intervention risk remains low in the near term. “Memory of the Ministry of Finance’s intervention is still fresh,” he said.

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