© Stocksak. FILE PHOTO – Banknotes in Japanese yen or U.S. dollars are shown in this illustration taken September 23, 2022. REUTERS/Florence Lo/Illustration
By Karen Brettell
NEW YORK (Stocksak), – The dollar surpassed 150 yen on Thursday for the first time since 1990. Meanwhile, the British pound fell in choppy trading following Liz Truss’s resignation as Prime Minister of the United Kingdom.
The Japanese currency fell sharply from its interim high of 150.09 in overnight trading to plummet to 149.63 within one minute. This raised suspicions that the Bank of Japan and Ministry of Finance might be making stealth intervention at key levels.
The yen rebounded to reach new 32-year highs during afternoon trading in New York. However, it reached as high as 150.25. It was last traded at 150.18.
Although it is not certain whether any intervention will be necessary, analysts believe that the move would not stop the currency’s weakening unless there is a change in the Bank of Japan’s ultra-dovish policies.
“Until you see the BOJ change their tune or if we see the U.S.economic outlook deteriorate much faster that will help Fed finally deliver that Fed turn, you’re going see that the bet on the yen remains the favorite trade in FX,” said Edward Moya. He is a senior market analyst at OANDA New York.
As inflation continues to rise, the Federal Reserve is expected continue to raise interest rates. Some forecast that its benchmark overnight rate will peak at 5%. The current rate is between 3.00% and 3.25%.
Patrick Harker, president of Philadelphia Fed, said Thursday that the central banking is not done raising its short term rate target amid very high inflation levels. Harker also stated that it was likely the U.S. central Bank will find space next to pause tightening and assess the impact on the economy.
Higher interest rates have had a significant impact on the housing market, despite the fact that other sectors, including jobs, remain strong. Thursday’s data showed that the September sales of existing homes in America fell for the eighth consecutive month.
Expectations of higher interest rates have driven U.S. yields up and the dollar down, especially against the Japanese yen. The BOJ is committed keeping interest rates at or below zero.
On Thursday, Japanese policymakers issued new threats of intervention. They are more likely to intervene if currency movements become more unpredictable.
“The (Ministry of Finance), has made it very clear that they are willing to intervene if there’s disorderly price movement, so the market are priced for that,” said Derek Halpenny from MUFG. He is the head of European global markets research at MUFG.
“Obviously, if the price breaks clearly above 150, we may see some disorderly action and that could trigger some action,” he said, while emphasizing that it would take a sharp movement in the pair to trigger intervention.
The next BOJ policy meeting will be held Oct. 27-28.
The British pound fell on the day Truss announced that she would resign from her position as prime minister. Six weeks after her appointment, Truss announced an economic program that sent shockwaves through market and divided her Conservative Party.
The pound rose ahead of the resignation announcement and then hit session highs before reversing course and falling lower. It was last at $1.1219, down 0.05%.
“Initially, this will likely to take an uncertainty premium off the market, but that depends on who takes over, and you need a steady hand from the top,” Viraj Patel, global macro strategist, Vanda (NASDAQ) Research in London.
Analysts said that the 0.10% drop in the yen against a basket major currencies to 112.86 was likely due to consolidation. The euro gained 0.13 percent to $0.9785.
Exchange rate bid prices at 3:03PM (1903 GMT).
Description RIC U.S. Closing Pct Change YTD YTD Pct High Low Bid
Dollar index 112.8600 12.9800 -0.10% 17.977% (+113.0900) +112.1600
Euro/Dollar $0.9785 $0.9772 +0.13% +0.00% +$0.9846 +$0.9755
Dollar/Yen 150.1800 149.9100 +0.19% +0.00% +150.2400 +149.5500
Euro/Yen 146.95 146.49 +0.31% +0.00% +147.2900 +146.2500
Dollar/Swiss 1.0041 1.0046 -0.04% +0.00% +1.0068 +0.9996
Sterling/Dollar $1.1219 $1.1223 -0.05% +0.00% +$1.1336 +$1.1172
Dollar/Canadian 1.3769 1.3762 +0.06% +0.00% +1.3806 +1.3651
Aussie/Dollar $0.6279 $0.6271 +0.15% +0.00% +$0.6356 +$0.6229
Euro/Swiss 0.9826 0.9816 +0.10% +0.00% +0.9851 +0.9812
Euro/Sterling 0.8719 0.8710 +0.10% +0.00% +0.8757 +0.8675
NZ $0.5674 $0.5677 $0.5677 0.03% +0.00% =$0.5741 +$0.5624
Dollar/Norway 10.6530 10.6315 +0.17% +0.00% +10.6700 +10.5500
Euro/Norway 10.4248 10.3666 +0.56% +0.00% +10.4451 +10.3585
Dollar/Sweden 11.2622 11.2076 +0.61% +0.00% +11.2835 +11.1600
Euro/Sweden 11.0216 10.9549 +0.61% +0.00% +11.0331 +10.9515