NEW YORK, July 31 The dollar eased against the Japanese yen on Friday, with traders alert for a second round of intervention after Japanese authorities stepped in to prop up their currency a day earlier.
The dollar slipped as much as 0.6% to 158.535 yen, before recovering to trade down 0.1% at 159.31 yen, a day after sinking 2.4%
The U.S. Treasury has informed a number of banks that it may intervene in the yen market on Friday and that they should “stand ready for future action,” a source familiar with the matter told Reuters. Tokyo was also receiving support from the U.S. that “goes beyond psychological support”, Japan’s top foreign exchange diplomat said on Friday.
Eric Theoret, FX strategist at Scotiabank, said it was unclear if Friday’s modest rise in the yen was a result of actual intervention, or traders reacting to the possibility of one in the near future. “In thin liquidity, intervention can have a much greater impact. Even the mere kind of possibility that this could happen is definitely something that markets are going to respond to in a very sensitive way,” Theoret said. The Bank of Japan earlier in the day kept short-term interest rates steady at 1% in a widely expected move.