Precise Investors Editorial Team
Much of the focus in currency markets recently has been on the yen, which has rallied as much as 3% over the past two sessions
The yen held firm on Tuesday after two straight sessions of sharp gains as traders remained on alert to the prospect of currency intervention by authorities.
The rising yen took a toll on the dollar, which languished near a four-month low as it was further pressured by problems of its own.
Much of the focus in currency markets recently has been on the yen, which has rallied as much as 3% over the past two sessions.
That has helped the yen steady around the 153-154 per dollar level, with the Japanese currency last at 154.24 per dollar, some distance away from Friday’s low of 159.23.
It was very effective, and rightly so the Fed move was unexpected, said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis.
Top Japanese authorities said on Monday they have been in close coordination with the U.S. on foreign exchange.
The possibility that an official intervention could be on the horizon has in turn left investors hesitant to push the yen lower once again, even as concerns remain over Japan’s fiscal health. Analysts also say coordinated intervention has a high bar to clear, and may not come as soon as markets expect.
This is not the end of it. Yes, I think the market is slightly more wary, but if nothing happens after a while, I think there will be renewed attempts to test the resolve of the Japanese authorities, said Moh Siong Sim, FX strategist at OCBC.
Perhaps at that point in time, then you might see actual intervention come in, to send an even stronger message, Sim said.
Bank of Japan money market data indicated that a spike in the yen rate against the dollar on Friday was not likely due to official Japanese intervention.
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