The dollar-yen pair continued to trade in a narrow range centered around the 157.30 level in the Tokyo foreign exchange market on the morning of the 22nd. With Tokyo markets closed for a holiday, trading was thin and the market lacked clear direction. Caution over the rate check that the Bank of Japan reportedly conducted late last week is supporting the yen’s downside, while yen-selling pressure rooted in concerns about Japan’s fiscal management remains persistent, leaving the market in a stalemate as the two forces collide.
As of 9:41 a.m., the trading ranges were: dollar-yen from 157.29 to 157.42, EUR/JPY from 180.34 to 180.48, and Euro-Dollar from 1.1462 to 1.1468 dollars.
Looking back at the flow since late last week, it was revealed on the 21st that the Bank of Japan had conducted a rate check, querying financial institutions about exchange rate levels. The market interpreted this as an attempt to deter speculative yen selling ahead of Japan’s extended Golden Week holiday. With some viewing the rate check as a preparatory step toward actual currency intervention by the Japanese government and the Bank of Japan, intervention caution spread among market participants.
However, after the yen was temporarily bought back in response to the rate check reports, dollar buybacks gained the upper hand in overseas markets. In the New York market, as of the morning of Monday the 21st, the yen traded at 157.30–40 per dollar, marking a 47-sen yen depreciation and dollar appreciation from the 156.83–93 level seen at 5 p.m. the previous Friday. The yen fell back to the lower 157 range.
The prevailing view in the market is that dollar buybacks tend to emerge in the 156 range due to the dollar’s relative cheapness. The fact that crude oil prices and U.S. long-term interest rates have stopped declining is also seen as a factor underpinning the dollar. In the Tokyo market on the afternoon of the 21st, the dollar-yen pair held above the 157 level, showing notable resilience.
In euro-related trading, Euro-Dollar moved from the 1.1460-dollar range to around 1.1490 dollars. EUR/JPY continued to trade in the lower 180 range. In the New York market, EUR/JPY reached 180.60–70, marking a 57-sen yen depreciation and euro appreciation from the previous weekend.
With Tokyo markets closed for the holiday, market participants’ attention is focused on price action after European players enter the market, and on how the Japanese government and the Bank of Japan will respond once trading resumes after the holiday. While some argue that the rate check has lowered the psychological hurdle for intervention, whether authorities will actually step in remains uncertain.
Concerns about Japan’s fiscal management continue to be recognized as a structural factor driving yen selling. With persistent caution over loosening fiscal discipline and increased government bond issuance, some market voices suggest that the yen is unlikely to reverse course through temporary deterrent measures such as rate checks alone. Behind the dollar-yen pair’s continued consolidation in the 157 range lies a tug-of-war between yen-depreciation pressure and yen buying driven by intervention caution.
The focus going forward is on how far the yen will be sold off in overseas markets during Japan’s holiday period, and what stance Japanese authorities will take after the holiday. Some in the market speculate that actual currency intervention could occur if the yen falls further, but for now a wait-and-see attitude prevails.
finance.biggo.com