By Gertrude Chavez-Dreyfuss and Alun John
NEW YORK/LONDON (Reuters) – The Japanese yen rose across the board on Thursday after monetary authorities intervened in the foreign exchange market for the first time since 1998 to boost the troubled currency, although analysts said Japan could struggle to exchange the yen to keep strong.
The dollar was last down 1.2% at 142.33 yen. After the intervention, it hit a low of 140.31 after previously hitting a new 24-year high of 145.9 yen. The range between the daily high and low for the pair was the widest since June 2016.
North American traders cautiously pushed the dollar higher against the yen after Japan’s intervention, but few are questioning Japan’s actions right now.
“The market is nervous,” said Steven Englander, head of global G10 FX research and North America macro strategy at Standard Chartered in New York.
“There is a risk that Japan will become a permanent presence in the market for intervention to be successful. Not that Japan has to intervene every day, but the market must fear intervention,” he added.
The euro, pound, Swiss franc, Australian and New Zealand dollars also fell against the yen.
“We acted decisively,” Japan’s deputy finance minister for international affairs Masato Kanda told reporters, affirming when asked if it meant intervention.
The confirmation of the intervention came just hours after the BOJ decided to keep interest rates low to support the country’s sluggish economic recovery.
BoJ Governor Haruhiko Kuroda told reporters the central bank could refrain from raising interest rates or changing its dovish policy for years.
In contrast, central banks around the world, particularly the Federal Reserve, are aggressively raising interest rates and monetary policy divergence has weighed on the yen.
However, analysts said Japan could not provide sustained support for the currency.
“Over the next three to six months, or possibly even longer, as long as these divergent monetary policy paths persist and these divergences remain, you will continue to see a weaker yen,” said Brendan McKenna, international economist and FX strategist at Wells Fargo Securities.
Even after Thursday’s moves, the dollar is still up 23.6% against the yen so far this year on its way to its biggest annual percentage gain in 43 years.
CENTRAL BANK BONANZA
On a busy day for markets, the pound recouped the small gain it made in London trading after the Bank of England hiked interest rates by 50 basis points.
The hike was in line with expectations, although markets had priced in a small chance for a larger 75 basis point move.
Sterling was last down 0.2% to $1.1251, not too far off a fresh 37-year low of $1.1213 set in Asian trading.
The euro remained little changed at $0.9832, recovering from a fresh 20-year low of $0.9807 set earlier in the global session.
The dollar index, which measures the value of the greenback against a basket of six major currencies, slipped 0.1% to 111.32, falling from a 20-year high of 111.81 set early in the day after the Fed’s closed meeting on Sept was reached on Wednesday.
The Fed issued new forecasts showing rates will peak at 4.6% next year, with no cuts through 2024. It increased its target rate range by a further 75 basis points (bps) overnight to 3%-3, 25%, as commonly expected.
The dollar was already supported by safe-haven demand after Russian President Vladimir Putin announced on Wednesday that he would call up reservists to fight in Ukraine.
Separately, the Swiss franc plummeted after the Swiss central bank hiked rates by 75 basis points, amid some raised the possibility of a full percentage point move.
The dollar and euro are both up around 1.2% against the franc, with the greenback last trading at 0.9783 francs and the euro at 0.9619 francs.
The Norwegian krone weakened against the euro and the dollar after the country’s central bank hiked interest rates by an expected 50 basis points, signaling a more gradual approach to tightening ahead.
The euro was last up 0.5% to 10.2203 kroner, while the dollar was up 0.3% to 10.3955.
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Currency bid prices at 15:04 (1904 GMT)
Description RIC Last US Close Pct Change YTD Pct High bid Low bid
Dollar Index 111.2800 111.4700 -0.15% 16.325% +111.8100 +110.4600
Euro/Dollar $0.9835 $0.9838 -0.01% -13.47% +$0.9908 +$0.9807
Dollar/Yen 142.4400 144.1050 -1.16% +23.72% +145.8900 +140.3100
Euro/Yen 140.09 141.73 -1.16% +7.50% +143.7000 +138.7200
Dollar/Swiss 0.9787 0.9663 +1.30% +7.32% +0.9849 +0.9622
Sterling/Dollar $1.1255 $1.1270 -0.11% -16.76% + $1.1363 + $1.1213
Dollar/Canadian Dollar 1.3487 1.3466 +0.16% +6.68% +1.3544 +1.3410
Aussie/Dollar $0.6643 $0.6633 +0.18% -8.58% + $0.6670 + $0.6574
Euro/Swiss 0.9624 0.9507 +1.23% -7.18% +0.9715 +0.9468
Euro/Pound Sterling 0.8736 0.8729 +0.08% +4.00% +0.8759 +0.8692
New Zealand $0.5843 $0.5853 -0.16% -14.62% +$0.5887 +$0.5806
Dollar/Norway 10.3970 10.3560 +0.34% +17.96% +10.4330 +10.2930
Euro/Norway 10.2318 10.1766 +0.54% +2.19% +10.2519 +10.1386
Dollar/Sweden 11.0681 11.0627 -0.14% +22.74% +11.1375 +10.9718
Euro/Sweden 10.8611 10.8759 -0.14% +6.13% +10.9290 +10.8530
(Reporting by Gertrude Chavez-Dreyfuss in New York and Alun John in London; Additional reporting by Bansari Mayur Kamdar in Bengalaru and Harry Robertson in London, Kevin Buckland in Tokyo; Editing by Kirsten Donovan)
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