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The Japanese yen currency has continued to lose value during the US trading session with the USDJPY pair moving around the 147.00 benchmark level before starting to back off somewhat.
So far, the rest of the foreign exchange market has been pretty muted compared to the moves in the Japanese yen, which continues to lose ground against the US dollar and other currencies.
Several Japanese officials have out on the wires this morning trying to talk down the rise in the yen. Additionally, the yen continued to weaken today despite some pretty high inflation data.
Japanese wholesale level inflation, which is the PPI index for September surprised to the upside earlier today. Higher commodity prices and the weak yen impacted inflation.
The flow-through from high PPI to CPI has been limited in Japan but the data today looks like it will continue to help Japanese CPI inflation at recent highs.
The Bank of Japan has been sticking to its view that the CPI inflation levels are not sustainable, and the Bank wants to see wage gains to alter their view. Therefore, the yen is not reacting.
Japan finance minister Suzuki said earlier this that “excess FX volatility and disorderly moves can hurt economy and financial stability earlier today”. Intervention is looming.
He also noted that “G20 Japan is deeply worried about recent sharp forex volatility” while he explained that the recent yen intervention was prompted by excess moves by speculators
More intervention talks as he said that the bank “cannot tolerate excess moves by speculators” and we’ll respond appropriately to excess FX volatility”.
Japanese chief cabinet secretary Matsuno came out with further weak verbal intervention talk when he said that he is “Closely watching FX moves with a strong sense of urgency”.
Overall, it does seem that Bank of Japan could be preparing to intervene. I think if the US CPI report is strong today and the US dollar rises they may step at some point when the Japanese session gets underway on Friday.
