(Bloomberg) — The yen is weakening toward 152 per dollar, a key level that traders see elevating risk that Japanese officials intervene in the market, after strong US factory data boosted the dollar.
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The Japanese currency slipped 0.2% against the dollar on Monday after data showed US factory activity unexpectedly expanding, reinforcing bets that the Federal Reserve will take its time in lowering interest rates. The move puts the yen, which last week touched its weakest level in 34 years, at about 151.65 per dollar.
Traders are on high alert after Japanese Finance Minister Shunichi Suzuki said authorities are monitoring the yen with a high sense of urgency and are ready to take appropriate measures against any excessive moves.
“Authorities seem nervous about the 152 level — which, on the longer-term charts, is a good level of resistance,” said Brad Bechtel, global head of FX at Jefferies. “I don’t think they would respond if the yen is slowly grinding through 152. But a big sharp move through 152 into 154 or 155 might see a response.”
Japanese officials have been saying that they’re willing to take action in the currency market, if needed, to stem the slide in the yen. The currency has lost about 7% against the greenback so far in 2024 and is the worst performer among Group-of-10 peers over the past year.
Even after the Bank of Japan ended the world’s last negative interest-rate policy, investors remain focused on the rate gap between Japan and US.
What Bloomberg Economics Says…
“Officials could wait until after the yen breaches that threshold and then pounce after the initial wave of yen selling exhausts itself — increasing the impact of intervention.
Our model shows the outlook for the yen is finely balanced but the risks are skewed toward appreciation — suggesting this could be a rare window when intervention succeeds.”
— Taro Kimura, economist
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Bond traders on Monday pared back the amount of monetary policy easing they expect to see in the US this year after ISM manufacturing for March exceeded all estimates in Bloomberg’s survey of economists. That offered support to both the dollar and US Treasury yields, while adding pressure to the yen and other G-10 currencies.
Investors are now looking ahead to US data on Tuesday, which economists expect will show the number of job openings continued to drop in February. US non-farm payrolls data on Friday and inflation figures next week will also help to guide trader expectations.
–With assistance from George Lei.
(Updates prices; adds comment and detail on US data.)
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