Investing.com – The yen was vulnerable on Monday, with the dollar approaching key intervention levels against the yen, even as government officials reiterated that they would step in to support the yen.
The pair, which measures the amount of yen required to buy one dollar, edged higher on Monday to 159.93 yen. The pair briefly approached 160 yen, its highest level in more than 30 years and triggered government intervention in May.
Government intervention in May caused USD/JPY to fall to 151.
The yen’s recent decline was driven by dovish signals from the Bank of Japan at its June meeting. The central bank kept interest rates unchanged and said it had no immediate plans to further tighten policy and that a decision to reduce bond purchases would only be made in July.
The move disappointed traders who had expected a more hawkish stance from the Bank of Japan, especially as the bank warned that excessive yen weakness could lead to a rate hike.
Bank of Japan meeting minutes released on Monday reiterated this view.
Minutes of the meeting also showed that the Bank of Japan is prepared to further raise interest rates if economic growth accelerates this year. But data so far paint a middling picture for Japan’s economy, which shrank in the first quarter of 2024.
In March this year, the Bank of Japan raised interest rates for the first time in 17 years, bringing interest rates out of negative territory after nearly 10 years. But the move provided little support for the yen, which still faces pressure from the huge gap between U.S. and Japanese interest rates.
Threat of yen intervention continues
The yen has weakened recently despite continued warnings from Japanese government officials about potential intervention.
Top currency diplomat Masato Kanda reiterated his warning that he would instruct the Bank of Japan to intervene in markets if currency markets experience “excessive” volatility. But he did not comment on whether the yen’s recent moves were excessive.
Kanda said he was ready “to intervene 24 hours a day if necessary.”
Kanda has taken a leading role in government intervention, especially the record dollar sell-off in 2022.
