Yen surge sparks central bank intervention talk
Japan reports fourth-quarter economic growth data on Monday, with many expecting a contraction
TOKYO (AFP) - Japanese government officials on Friday pledged to take "appropriate measures" as the surging yen fuels speculation that the central bank will intervene in currency markets to arrest its ascent.
The unit has soared to levels last seen when the Bank of Japan unleashed a second wave of stimulus in late 2014, as part of Tokyo s attempts to stimulate the laggard economy.
But plunging equity markets fuelled by fears about the world economy have sent the yen skyward as traders buy investments seen as a safe bet -- pushing the unit towards its biggest two-week advance since the 1998 Asian financial crisis, according to Bloomberg News.
On Friday, Japanese officials declined to say if the BoJ had intervened in currency markets for the first time since 2011.
But "there have been some rough price movements so we are watching the market closely and will take appropriate measures if necessary", finance minister Taro Aso said.
Government officials declined to elaborate on what sort of measures Tokyo might take, but said they would discuss currency rates at a G20 meeting later this month.
BoJ governor Haruhiko Kuroda called the market reaction "excessive, given that the fundamentals of the Japanese economy" are steady.
He made the comment before meeting with Prime Minister Shinzo Abe Friday, local media reported.
Japan reports fourth-quarter economic growth data on Monday, with many expecting a contraction.
- Verbal intervention -
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"The verbal intervention has already started, with MoF (Ministry of Finance) officials talking about moves being rough, which looks like the new code word for undesired strength," said Ray Attrill, co-head of currency strategy at National Australia Bank.
He added that "110 yen might be some line in the sand when the MoF will lean on the BoJ to shore things up".
In Tokyo, the dollar changed hands at 112.43 yen, slightly up from 112.39 yen in New York, where the greenback slumped to below 111 yen, around its lowest levels since October 2014.
The dollar-yen rate was above 114 before a public holiday in Japan on Thursday.
The euro weakened to 127.09 yen from 127.25 yen in new York, while it bought $1.1303 against $1.1323.
The dollar has been under renewed pressure after Federal Reserve Chair Janet Yellen s noncommittal stance on interest rate policy left currency investors nervous.
Her warnings during congressional testimony that global market turmoil could threaten the US economy helped send equity markets from Tokyo to New York sharply lower.
"There was nothing there deflecting the market from the view that the Fed is on hold for longer and that s how the market traded in what was last night deeper risk-off sentiment," National Australia Bank said in a commentary, referring to Yellen s comments.
A bloodbath on equity markets and worries that the global economy was not as strong as thought have all but wiped away the likelihood of the Fed raising interest rates again this year, analysts say.
