Around 9:40 p.m., the Japanese currency appreciated by 1.29% once morest the greenback, to 127.88 yen for one dollar. Earlier, it had reached 127.46 yen per dollar, a peak of more than seven months.
The yen on Friday set multi-month highs once morest many currencies, spurred by rising Japanese bond rates and the intervention of the Bank of Japan in an attempt to calm the debt market.
Around 8:40 p.m. GMT, the Japanese currency appreciated by 1.29% once morest the greenback, to 127.88 yen for one dollar. Earlier, it had reached 127.46 yen per dollar, a peak of more than seven months.
It also recorded a 5-month high once morest the Swiss franc and a 9-month high once morest the Canadian dollar.
The Bank of Japan (BoJ) announced on Friday that it would increase its purchases of Japanese government bonds on the market on Monday.
The decision followed the jump in Japanese bond yields. The yield on 10-year Japanese government bonds went up to 0.57% on Friday, a first in more than eight years.
The 10-year rate thus ventured much further, on the scale of the very corseted Japanese market, from the limit set by the BoJ, ie 0.50%.
It has been more than six years since the institution decided to control the level of long-term interest rates, in an attempt to promote economic activity and moderate inflation.
At the end of December, the BoJ took the market by surprise on Tuesday and announced that it would now let the rate of 10-year Japanese government bonds appreciate to 0.50%, once morest 0.25% previously.
The central bank’s announcement was interpreted as the start of a new era, following a long streak of ultra-accommodative monetary policy.
“The market is testing the tolerance limits of the Bank of Japan,” commented Bipan Rai of CIBC Capital Markets. A movement that “speculates that (the BoJ) might soon modify its rate control program once more or end it”.
On Tuesday, the Japanese daily Yomiuri Shimbun reported that officials of the institution were indeed considering making changes.
For Bipan Rai, nothing accredits the thesis of a new reversal in the short term, “but the market plays on it”, he says, and bets once morest the dollar, already clearly weakened by anticipations of the near end of the cycle of monetary tightening by the US central bank (Fed).
The analyst expects nothing from the BoJ’s next meeting next Tuesday and Wednesday, and doesn’t see any upheaval until spring, at best, following the term of the current governor of the Bank of Japan ends, Haruhiko Kuroda, whose successor is not yet known.
