Tokyo Moves in to Stem the Rise of Yen – Dollar on 3-Month High against Yen

October 31 00:00 2011

New York, October 31 ( – The yen was reined in once again when the Japanese government intervened for the third time this year in the currency markets with the result that the dollar rose to a three-month high against the yen to as high as 78.99 yen the highest since August 5. Earlier, in Asian trade, it had hit another all-time low of 75.31 yen on EBS.

Jan Azumi, Japan’s finance minister, said that the government had intervened unilaterally but he did not reveal the amount of intervention. He said that this action was necessary because the yen’s strength threatens to derail the economy’s recovery from the March earthquake.

Yunosuke Ikeda, senior FX strategist at Nomura Securities said, “It was very good timing. The BOJ laid the groundwork by easing last week. Speculators’ yen-buying positions have piled up, and intervention is most effective in such cases.” The latest U.S. CFTC data shows that currency speculators doubled their net long position in the yen to 54,279 contracts in the week ended October 25, the highest since the beginning of August.

Ikeda added “This will likely be a one-off intervention but I think the government wants to stop the yen’s strength, which is out of sync with gradually improving global economic fundamentals.”

Monday’s intervention saw the dollar surging 0.5 percent against the euro, pushing it down to $1.4083, off the two-month high of $1.4248 hit on Thursday. The dollar index rose 0.9 percent to 75.71.