NEW YORK: The Japanese yen gained modestly against the US dollar on Wednesday as traders focused on whether weakness in the Japanese currency will prompt officials in the country to intervene.
Volumes are light ahead of Thursday’s Christmas Day holiday, when US and many international markets will be closed. The yen has weakened despite the Bank of Japan delivering a long-anticipated rate hike last Friday. The increase had been well-telegraphed and comments from Governor Kazuo Ueda disappointed some in the market who had bet on a more hawkish tone.
That has left investors vigilant to official yen-buying from Tokyo, particularly as trading volumes thin towards the year-end, which analysts say is an opportune time for authorities to take action.
Finance Minister Satsuki Katayama said on Tuesday that Japan has a free hand in dealing with excessive yen moves, issuing the strongest warning to date on Tokyo’s readiness to intervene.
Her remarks arrested the yen’s decline. The Japanese currency was last up 0.25 percent on the day against the US dollar at 155.84 per dollar. The dollar reached 157.77 yen on Friday.
“The yen has pulled back from recent highs as repeated warnings from Japanese officials about possible FX intervention limited gains,” FX analysts at LMAX Group said in a note on Wednesday.
The dollar was otherwise mixed.
The dollar index, which measures it against a basket of other currencies, including the yen and the euro, rose 0.07 percent to 97.96, with the euro down 0.14 percent at USD1.1778. Sterling weakened 0.13 percent to USD1.3498.
The Australian dollar strengthened 0.07 percent to AD0.6705 and the Canadian dollar gained 0.11 percent to CD1.367 per US dollar.
The US currency has fallen this year as the Federal Reserve cuts rates, with more easing expected next year while analysts expect other central banks to have completed their rate reductions.
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