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Yen Continues Decline as Minister Confirms Government Could Step In

Yen Continues Decline as Minister Confirms Government Could Step In

As Japans currency experienced another fall today, the government reaffirmed earlier statements that they would step in to control the bleeding if the fall continues.

New York, NY, USA, June 21, 2016 — The yen declined for the second consecutive day against main competitors after the Finance Minister of Japan expanded on previous comments on Monday regarding the country’s financial policies. The last time Japan stepped into the markets to control the yen was five years ago following one of the nation’s worst natural disasters in history. The most recent statements by the Minister, Taro Aso, came only 24 hours after he announced that “it would be normal for us to step in should we need to bolster the currency.”

The yen fell 0.5% to 108.92 per dollar this morning and earlier reached 108.96, the worst figures since late last month. That said, the yen has still performed well, rising over 11 percent versus the dollar this year, better than any of its Group-of-10 competitors.

“The recent rhetoric from Japans officials has not gone unnoticed by the financial markets” said Sean Callow, a foreign-currency specialist at Westpac in Adelaide. “If the authorities involved keep failing to act they may start to be perceived by onlookers as “all bark and no bite”.

Federal Reserve Perspective

The DKY spot rate, which analyses the dollar against 10 peers, was relatively unaffected after a steady week long rise. Noises coming from U.S. economic authorities still hint towards interest rate hikes this year, reaffirmed by the New York Fed President.

The yen soared against the dollar last Monday reaching its highest level in one and a half years, bolstering gains after Japans Central Bank decided against injecting stimulus in its meeting late April.

“The Finance Ministers statements caused a re-evaluation of positions that had built up in reaction to trepidation of how far the yen could be raised by market activity ,” said Stuart Poulson, – Head of Corporate trading at Nikko-Desjardins Asset Management. “The benchmark for any meaningful intervention by the Japanese is fairly high. We are probably looking at past 100 per USD at least” he added.

While recent comments by Aso and the Governor of Japans central bank have had caused limited movement regarding the yen, the strength of the currency still threatens to weaken profits of the country’s exporters and could also have a negative effect on general business confidence.

Arin Takashi
Nikko-Desjardins Asset Management
Tokyo, Japan

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