Japan's Finance Minister Katsunobu Kato has reiterated the government's concerns regarding excessive selling of the yen, signaling readiness to intervene in the foreign exchange market to stabilize the currency. The yen has recently hit a five-month low, prompting heightened scrutiny from authorities.
The yen has been under pressure, recently trading at approximately 157 per dollar, which is a significant drop of 4.7% this month alone. This decline has raised alarms within the Japanese government, as Finance Minister Kato described the situation as alarming. The persistent weakness of the yen is attributed to various factors, including the disparity between U.S. and Japanese interest rates.
During a recent press conference, Kato emphasized that the government remains vigilant regarding foreign exchange movements. He stated, "There is no change to our stance," reinforcing the idea that the government is prepared to take action against excessive fluctuations in the currency market. Kato's comments come as the market anticipates two significant central bank events that could further influence the yen's trajectory.
Kato expressed deep concern over recent currency movements, particularly those driven by speculators. He indicated that the government would take appropriate measures to counter excessive foreign exchange moves. Analysts suggest that the current low liquidity in the market, typical during the holiday season, could amplify the potential for sharp currency movements, making any intervention more impactful.
Following Kato's remarks, the yen briefly strengthened against the dollar, touching 157.06 before retreating. Market participants are closely monitoring upcoming speeches from Bank of Japan Governor Kazuo Ueda, as any indication of delayed interest rate hikes could further pressure the yen. Some hedge funds are speculating that the yen could reach the 160-165 range, intensifying the urgency for government intervention.
The Japanese authorities have refrained from intervening in the currency market since July, when the yen hit 160 against the dollar. Since then, the government has expended nearly $100 billion to support the yen. Analysts are closely watching the 161.95 mark, which could trigger renewed intervention efforts if reached again.
As the yen continues to face downward pressure, Japan's Finance Minister Kato's warnings serve as a reminder of the government's commitment to maintaining currency stability. With market conditions remaining volatile, traders and analysts alike will be watching closely for any signs of intervention from Japanese authorities in the coming days.
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