Yen holdings after Japan supports the currency for the first time since 1998

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  • “We have taken decisive action,” says the Japanese deputy finance minister
  • Dollar / yen has the widest spread between the daily high and low since 2016
  • Pound, Swiss franc and Norwegian krone slide after a slight rate hike
  • The dollar reaches a new multi-year high against the pound, the euro in early trading

LONDON, 22 Sept. (Reuters) – The Japanese yen strengthened on Thursday after authorities intervened in the foreign exchange market to support the battered currency for the first time since 1998, although trade was unstable.

The dollar fell 2% to 141.2 yen. It hit a low of 140.31 post-intervention, having previously reached a new high in 24 years of 145.9 yen.

The spread between the day’s high and low for the pair was the widest since June 2016.

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The euro, the Australian dollar and the pound also plunged against the Japanese currency before recovering some ground. ,,

“We have taken decisive action,” Deputy Finance Minister for International Affairs Masato Kanda told reporters, answering affirmatively whether this meant intervention. Read more

Confirmation of the intervention came just hours after the BOJ decided to keep interest rates low to support the country’s fragile economic recovery.

BOJ Governor Haruhiko Kuroda told reporters that the central bank could hold back a rate hike for years or change its dovish policy guidance.

Conversely, central banks around the world, particularly the US Federal Reserve, are aggressively raising rates and political divergence has weighed on the yen.

“Unless there is a clear shift in the fundamental context that pushes the Japanese yen to weakening, the ability to reverse the trend is limited,” said Derek Halpenny, head of global market research at MUFG.

“The finance ministry could see this as a time saver and hope the Fed completes its tightening cycle by the end of the year, which could help bring some degree of turnaround in the trend.”

Even after Thursday’s moves, the dollar is still up 23.4% against the yen this year.

Yen interventions 1990-2020

CENTRAL BANK BONANZA

On a busy day for the markets, the pound reduced the small advance it had made in London trading after the Bank of England raised interest rates by 50 basis points.

The increase was in line with expectations, but markets were pricing in a small chance of a move larger than 75 basis points.

The pound rose a last 0.16% against the dollar to $ 1.1288, not too far from a new 37-year low of $ 1.1213 hit in Asian trading.

“I am quite surprised that the bank did not take this opportunity to go to 75bps, particularly given the coverage of some of the other global central banks. The pound looks particularly vulnerable here if the bank stays behind the curve,” said Hugh Gimber. , Global Market strategist at JP Morgan Asset Management.

The euro was the last 0.3% higher against the dollar at $ 0.9868, up from a new 20-year low that hit Asian trade.

The dollar index – which measures the greenback against a basket of six other major currencies – came in at 110.76, slipping from a 20-year high of 111.81 reached earlier in the day after the meeting ended. Fed policy Wednesday.

The US central bank has issued new projections showing rates that will peak at 4.6% next year without cuts until 2024. It has raised its target interest rate range by another 75 basis points (bps) overnight. at 3% -3.25%, as widely expected. Read more

The dollar was already underpinned by demand for safe-haven assets after Russian President Vladimir Putin announced he would call in reservists to fight in Ukraine. Read more

Separately, the Swiss franc tumbled after the Swiss central bank raised rates by 75bps, when some talked about the possibility of a move by a full percentage point. Read more

The dollar and the euro both rose around 2% against the franc, with the dollar last at 0.9837 and the euro at 0.9681.

“I think the market reaction, the EUR / CHF rally, is a bit of an exaggeration,” said Chris Turner, ING’s Global Head of Markets.

The Norwegian krone eased against the euro after the central bank raised interest rates by an expected 50bps and said there could be a more gradual approach to future tightening. Read more

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Reporting by Alun John in London, additional reportage by Kevin Buckland in Tokyo and Harry Robertson in London; Editing by Emelia Sithole-Matarise, Raissa Kasolowsky, Kirsten Donovan

Our Standards: Thomson Reuters Trust Principles.

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