The US Dollar (USD) trades moderately lower against the Japanese Yen (JPY) on Friday, on track to close the week practically flat, as Japanese authorities’ warnings about further interventions keep Yen sellers on their toes.
The pair has stalled below 157.00 after bouncing from more than two-month lows on Wednesday, following another round of suspected action by Tokyo
Japanese top currency diplomat Atsushi Mimura said on Thursday that Japan faces no constraints on how often it can intervene on currency markets to support the Yen, and that he is in daily contact with US authorities, committed to stemming speculative JPY moves. The USD/JPY dropped more than 400 pips on April 30, in the first MOF intervention after the pair crossed the 160.00 level, considered the limit of tolerable Yen weakness for Japanese authorities. A Reuters report affirmed that Japan might have spent more than 5 trillion Yen (USD 32 billion) to boost the local currency, and recent price action suggests that smaller interventions have followed this week.
The Yen faces fundamental hurdles These actions are keeping Yen sellers at bay for now, although the fundamental backdrop casts doubt about the sustainability of that policy. The comparatively low interest rates set by the Bank of Japan (BoJ), combined with risks to Japan’s economy from higher Oil prices amid the country’s delicate fiscal stability, put the Yen in a vulnerable position. The US Dollar, on the other hand, is drawing some support from safe-haven trades on Friday as tensions in the Middle East escalate, dampening previous hopes of a swift end to the US-Iran war.