Intervention fears weigh on yen

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The yen pulled back from a record high against the dollar on talk that the Japanese authorities could move to weaken the currency.

The yen hit a record high of Y75.93 against the dollar on Friday as fears over global growth sparked haven demand for the Japanese currency and speculation of further quantitative easing by the Federal Reserve weighed on the greenback.

But the yen fell back on Monday after Yoshihiko Noda, Japan’s finance minister, signalled that Tokyo was prepared to take action to stem gains in its currency.

Mr Noda said he saw the yen rise as more “one-sided” than before and Tokyo would exchange information with other countries regarding currencies.

“We won’t rule out any measures and will take decisive action when necessary,” he said.

This stirred talk that Japan might be looking at returning to the market to sell the yen after its largely unsuccessful attempt to weaken the currency on August 4.

Lee Hardman, of Bank of Tokyo-Mitsubishi UFJ, said another bout of unilateral intervention could occur in the near term but recent comments by Takehiko Nakao, Japan’s vice-finance minister, signalled that sustained intervention to guide the yen to a specific level remained off the table.

“Historically, unilateral intervention has proved less effective than co-ordinated intervention,” Mr Hardman said.

“Unless there is a shift in economic fundamentals, it is difficult to envisage the yen strengthening trend being derailed.”

The yen was down 0.1 per cent to Y76.78 against the dollar, had lost 0.1 per cent to Y109.99 against the euro and had fallen 0.1 per cent to Y126.43 against sterling.

The dollar came under pressure as speculation intensified that Ben Bernanke, Fed chairman, would use a speech at Jackson Hole, Wyoming, on Friday to announce a third round of quantitative easing.

But by late day it had eased 0.1 per cent to $1.4359 against the euro, was 0.1 per cent stronger at $1.6463 against the pound. But it fell 0.3 per cent to $1.0414 against the Australian dollar.

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