Yen surges to six-month high as traders stay alert for signs of intervention

{"text":[[{"start":13.6,"text":"The yen surged against the US dollar on Monday, surpassing the level it reached after government intervention in early August, amid speculation that Japanese authorities might use the US Labor Day holiday to support the currency."}],[{"start":27.73,"text":"The yen gained as much as 1.4 per cent to touch ¥154.04 per dollar, its highest level since February, including a steep rise in the space of five minutes during the London morning."}],[{"start":40.876,"text":"The move takes the currency’s gains against the greenback over September’s five trading sessions to 3.4 per cent, leading some strategists to conclude that the yen is finally changing course after more than a year of largely falling."}],[{"start":55.52,"text":"“This could be something more sustainable . . . the yen could continue to strengthen further,” said Lee Hardman, senior currency analyst at MUFG."}],[{"start":63.684,"text":"He pointed to a widely expected move higher in Japanese interest rates as a factor offering support to the yen, as well as the possibility of a repatriation of capital to domestic assets by Japanese pension funds hunting for income."}],[{"start":null,"text":"

"}],[{"start":77.12,"text":"Monday’s move follows a massive ¥15.4tn ($99.6bn) intervention by the Japanese authorities in July and August — steps that unusually had additional support from the US government."}],[{"start":90.239,"text":"Since then, market speculation has focused on the next move by the Bank of Japan, whose monetary policy board meets next week."}],[{"start":97.943,"text":"Following public pressure from US Treasury secretary Scott Bessent for the BoJ to raise interest rates, markets are now pricing in a roughly 80 per cent chance of a 0.25 percentage point increase in borrowing costs to 1.25 per cent at the end of next week."}],[{"start":114.8,"text":"Speculation is also growing that the BoJ may opt to raise rates again in October, in a rare back-to-back move aimed at preventing it from falling behind the curve on inflation and which is likely to provide additional support to the currency."}],[{"start":128.32,"text":"“I wouldn’t have said this three weeks ago, but back-to-back rate hikes is becoming our base case. I think that is starting to spook some of the faster money, so I’m not surprised to see some quite sharp moves in forex as that risk gets absorbed,” said one Tokyo-based fund manager."}],[{"start":144.72,"text":"However, some investors are doubtful."}],[{"start":147.252,"text":"“My query at the moment is will the BoJ have the stomach to be properly hawkish and deliver?” said Mark Richards, head of investment team for Dynamic Multi-Asset at BNP Paribas Asset Management. “It’s going to be [a quarter point increase] and it’s going to be relatively hawkish in terms of messaging but thereafter I struggle a bit.”"}],[{"start":169.36,"text":"One investor pointed to some unusually large transactions in a market where volumes were lower ahead of the US Labor Day holiday, but added that they were uncertain as to whether an intervention had occurred."}],[{"start":177.52,"text":"“Many market participants are quite wary of the risk of official intervention, as liquidity is likely to be subdued” given the US holiday, said Masayuki Nakajima, a multi-asset strategist at Mizuho."}],[{"start":189.76,"text":"The yen’s rapid rise has renewed concerns about a potentially violent unwind of the so-called carry trade, similar to the market ructions in the summer of 2024 after the BoJ raised interest rates to 0.25 per cent."}],[{"start":204.129,"text":"Shrikant Kale, an analyst at Jefferies, said that although the size of the carry trade was difficult to estimate, outstanding cross-border yen borrowing had increased by two-thirds from ¥216tn in December 2021 to ¥360tn by March of this year."}],[{"start":221.062,"text":"By this measure, said Kale, “the current cycle is by far the largest carry trade build-up of the past three decades”, meaning that the BoJ would move cautiously in order to avoid financial instability."}],[{"start":232,"text":"Additional reporting by William Sandlund in Hong Kong"}],[{"start":240.48,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788824179_1534.mp3"}