By Alun John, Amanda Cooper and Dhara Ranasinghe
LONDON, April 30 (Reuters) – Japan’s yen surged 3%, the most in a day in over three years on Thursday, following stark warnings from Tokyo officials that intervention to prop up the currency, as well as action in other markets including energy, could be imminent.
Japanese Finance Minister Satsuki Katayama said earlier on Thursday that the timing to take “decisive action” in the market was nearing, in her strongest signal yet of potential currency intervention to prop up the sagging yen.
Top currency diplomat Atsushi Mimura also said the timing to take decisive action was approaching, adding that “extremely speculative” moves in the currency market were increasing. The Ministry of Finance has threatened intervention in currency and oil markets and on Thursday, reiterated that action could be “on all fronts”.
“This is our final evacuation warning to markets,” Mimura told reporters. When asked whether he was alluding to the chance of an imminent yen intervention, Mimura said: “I think market players would know what I mean.”
The dollar was last trading at 155.94 yen by 1250 GMT, as the Japanese currency strengthened sharply. The U.S. currency was on track for its biggest one-day drop since December 2022, when it fell 3.8% in a day.
Some market sources said the decline, which started in earnest around 1026 GMT, bore the hallmarks of possible official buying. In past episodes of official intervention, drops in the dollar against the yen have been far swifter.
THE OIL FACTOR
About an hour before the sustained rally in the yen, which has tumbled since the start of the Iran war because of Japan’s vulnerability to imported energy inflation, oil prices suddenly dropped in heavy volumes, with no apparent catalyst.
They had previously topped $125 a barrel following a report Washington was considering renewed military attacks on Iran.
As the June Brent contract was set to expire on Thursday, trading was erratic in both the front month and in second-month July.
It was not immediately clear if there was a link between Thursday’s rise in the yen and the drop in the oil price.
When asked whether he suspected intervention from the BOJ was behind the move in the yen, Societe Generale currency strategist Kenneth Broux said: “It certainly looks like it and short covering.”
“The ‘final warning’ comment has rattled a few accounts for sure,” he added.
Weekly positioning data shows investors hold the largest short position – one based on the assumption the yen will depreciate – since July 2024.
The Japanese finance ministry’s foreign exchange division could not be reached for immediate comment.
Tokyo last intervened when the yen weakened to almost 162 per dollar in July 2024.
Traders remain wary as intervention has loomed ever since the New York Federal Reserve conducted a rate check in January, according to reports, a signal markets took as at least tacit U.S. approval, if not outright support, for a stronger yen.
The New York Federal Reserve was not immediately available for comment.
“There’s been no confirmation from the BOJ but there is a heightened sense of urgency this morning on the willingness to intervene,” said Bank of America senior FX strategist Kamal Sharma.
“I suspect the market was poised for a move once we got over 160 yesterday and now we are back down near 157.”
In real terms the yen is trading near record lows.
Since the U.S. and Israel launched their war on Iran, oil prices have soared and Prime Minister Sanae Takaichi’s administration has been quick to highlight the damage.
Earlier this week, the Bank of Japan kept rates steady, but three of its nine-member board proposed hiking borrowing costs, signalling policymakers’ concerns over inflationary pressures from the conflict.
(Reporting by Alun John, Dhara Ranasinghe and Amanda Cooper in London and Makiko Yamazaki in Tokyo; Additional reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Dhara Ranasinghe, Elisa Martinuzzi and Joe Bavier)
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