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Yen bounces back against U.S. dollar

Yen bounces back against U.S. dollar

The yen dropped over 2 percent against the U.S. dollar Tuesday on mounting speculation the Japanese monetary authorities will step in and stem the currency's sharp rise.
The dollar, which had fallen to a 13-year low against the yen on Friday, rose to 95.00 yen from 93.01 yen in early London trading on mounting expectations that the Bank of Japan will intervene in the markets by selling yen to stem the export-sapping appreciation of the yen.
Expectations of coordinated action among the G7 group of leading industrial nations were fueled Sunday when they warned about the "recent excessive volatility" in the value of the Japanese currency, which last week traded against the U.S. dollar near the 90-yen level.
However, coordinated action with other central banks now looks unlikely following comments from French finance minister Christine Lagarde that any intervention would be Japanese in nature.
"One could argue that this makes the threat of some intervention less powerful, but let's remember that all we had so far were rather vague comments about volatility which had almost no impact on the market," said Calyon senior strategist Sebastien Barbe.
"At least Lagarde's comments suggest that the Bank of Japan may seriously consider this option and this may have contributed to keep the yen slightly softer," he added.
The yen has risen strongly in recent weeks as investors have reduced risk during the financial market turmoil and repatriated capital. Yen, because they could be borrowed at super-low interest rates, had been used to fund investments in potentially higher-yielding areas, such as emerging markets; the unwinding of those investments tends to send the yen up.


Updated : 2021-03-02 04:12 GMT+08:00