Japan finance minister’s remark fuels yen fall

London, Nov 27: The yen succumbed to fresh downward pressure on Tuesday after the Japanese finance minister acknowledged that some in Tokyo wanted to drive it lower, adding to negative sentiment following a credit rating downgrade by Fitch.

The euro and the dollar pushed up by around a third of a per cent against the weakened yen, rising to 109.60 yen and 124.55 yen respectively. At such levels, the euro was trading at around three week highs to the yen with the dollar at fresh three-and-a-half month highs. Analysts said in the context of a ratings downgrade, generally weak fundamentals and apparent official approval of a depreciation in the currency, it was difficult to see the yen going anywhere but further down.

“The fundamental picture continues to weaken. There are few policy options left for the Japanese authorities now. It’s only a matter of time before the Bank of Japan takes action to weaken the yen,” said Ian Stannard, forex strategist at BNP Paribas.

The dollar was looking flat against the euro with traders awaiting consumer confidence data later in the session. The currency pair was all but unchanged from the New York close around $0.8800. Japanese finance minister Masajuro Shiokawa added to gloomy sentiment about the yen, saying openly that some in official circles wanted to see the currency move lower. “There is such a mood. I will not deny it is one view, oneway of thinking,” he said.

He declined to comment on the possibility of intervention, but analysts say Japanese authorities are keen to see a weaker yen since it is one of the few remaining policy tools to stimulate the recession-bound economy.

“The market, which was already bearish on the yen, turned more eager about selling it because Shiokawa didn’t check the yen’s recent falls,” said Takashi Toyahara, manager of the fixed-income section at Nomura Securities. “The market clearly turned more comfortable about selling the yen after his remarks,” Toyahara said.
“The yen is expected to weaken in coming days, and gradually head towards 126 yen.”

— Reuters