The yen slid 3 percent versus the dollar on Thursday as Japan intervened to curb the currency's strength to support its export-led economy, one day after the Swiss central bank unveiled a shock cut in interest rates to cap a soaring Swiss franc. Japanese Finance Minister Yoshihiko Noda confirmed that Tokyo had intervened in the currency market, adding that Japan had acted by itself and was communicating with other countries on the move.
Noda did not provide details, such as levels and the scale of the intervention, but currency market sources said the Bank of Japan was intervening repeatedly to push down the yen. Recent gains in the yen have sparked fears that it could weigh on the country's economic recovery. The BoJ conducts intervention on behalf of the Ministry of Finance, the ministry in charge of currency policy.
The dollar surged 3.1 percent against the yen to 79.44 yen, its initial spike against the yen having started from around 77.15 yen or so. Earlier this week, the dollar hit a four-month low of 76.29 yen, close to its record trough of 76.25 yen in March. That strengthening caused consternation among Japanese exporters. Japan's yen-selling intervention was followed up by additional monetary easing by the BoJ.
In a policy decision reached a day earlier than initially planned, the BoJ boosted the size of its asset buying program to 15 trillion yen from 10 trillion yen previously, and also topped up by 5 trillion yen a 30 trillion yen programme for offering fixed rate fund injections into the money market. The yen slid broadly, tumbling 3.1 percent against the euro to 113.79 yen and 2.4 percent versus the Australian dollar to 84.82 yen.
There was also talk of active selling of the Australian dollar against the yen by Japanese retail margin traders, who had recently increased their combined net long position in dollar/yen and major cross/yen pairs to a record high. One resistance level for the dollar lies at 79.50 yen, a 61.8 percent retracement of the dollar's drop from an early July peak near 81.50 yen down to this week's four-month low.
The yen-selling intervention took place for the first time since March 18 when the BoJ and other central banks jointly intervened after the yen surged to the record high versus the greenback. That joint intervention came in the aftermath of a massive earthquake and tsunami that devastated northern Japan and caused turmoil in Japan's financial markets. The dollar has been under renewed pressure against the yen this week after a series of weak US indicators raised concerns about the US economy's outlook.