The Japan-US wide yield gap continues to weigh on this year’s worst-performing major currency.
Japan spent ¥9 trillion in September and October last year in their first intervention to support the yen since 1998.
Traders are wary of betting on further depreciation given the risk of intervention from authorities in Japan. Finance minister Shunichi Suzuki said last week that it is important to have stability in foreign exchange markets and for them to reflect fundamentals. The wide interest rate divide with the US is seen in the Treasury 10-year yield at 4.91%, which is almost six times that of Japan’s equivalent at 0.835%.
Safe havens including the dollar, the yen and the Swiss franc remained in focus Monday following news that an airbase in Iraq that hosts US and international forces was targeted overnight by rockets in an ongoing escalation of hostilities drawing in regional militia. A tweak to the BOJ’s ultra-loose monetary policy this month could propel the yen to 145 against the dollar if the central bank also flags that a rise in interest rates is coming, according to RBC BlueBay Asset Management.Yet until Monday the yen had hovered just below 150 per dollar since it went to 150.16 on Oct. 3. That move suddenly reversed, with it recovering to 147.43, stoking speculation that Japan had entered the market to prop up the currency.