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  • “We have taken decisive action,” says Japan’s Kanda
  • Dollar/yen has widest gap between daily high and daily low since 2016
  • British pound, Swiss franc and Norwegian krone slide after rate hikes
  • The dollar hits a new multi-year high against the British pound and the euro

LONDON/NEW YORK, Sept 22 (Reuters) – The Japanese yen jumped on Thursday after monetary authorities intervened in the foreign exchange market to boost the battered currency for the first time since 1998, although analysts said Japan could struggle to keep the yen strong for long.

The dollar was last down 1.5% at 141.91 yen. It hit a post-intervention low of 140.31, after hitting a new 24-year high of 145.9 yen. The gap between the daily high and low for the pair was the widest since June 2016.

The euro, Australian dollar and pound also plunged against the Japanese currency, before regaining some ground. , ,

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“We have taken decisive action,” Japan’s Vice Finance Minister for International Affairs Masato Kanda told reporters, answering yes when asked if that meant intervention. Read more

Confirmation of the intervention came just hours after the BOJ decided to keep interest rates low to support the country’s fragile economic recovery.

BOJ Governor Haruhiko Kuroda told reporters that the central bank could delay raising rates or change its dovish policy guidance for years.

In contrast, central banks around the world, including the US Federal Reserve, are aggressively raising rates and policy divergence has weighed on the yen.

However, analysts said Japan could not continue to support the currency in a sustainable manner.

“Over the next three to six months or possibly even longer, as long as these divergent monetary policy paths are still in place and these differences persist, you will continue to see a weaker yen,” said Brendan McKenna, international economist and FX Strategist at Wells Fargo Securities.

“Yields in the US are up almost six basis points today and yields in Japan are down. So I think if anything, the spread should continue to favor the US dollar. going forward, and that’s something that will continue to translate into a weaker yen through the end of this year and probably into early 2023,” he added.

The US 10-year yield hit 3.68%, its highest level since February 2011. It last rose 16 basis points to 3.674.

Even after Thursday’s moves, the dollar is still up 23.2% against the yen this year.

Yen interventions from the 1990s to the 2020s

CENTRAL BANK BONANZA

On a very busy day for markets, the pound pared the small advance it had made in London after the Bank of England raised interest rates by 50 basis points.

The rise was in line with expectations, but markets had priced in a small chance of a bigger 75 basis point move.

The pound was up 0.2% against the dollar at $1.1295, not too far off a fresh 37-year low of $1.1213 hit in Asian trade.

“I’m quite surprised the bank didn’t take this opportunity to go to 75 basis points, especially given the hedging of some of the other global central banks. The pound looks particularly vulnerable here if the bank stays behind the curve,” Hugh said. Gimber, global markets strategist at JP Morgan Asset Management.

The euro was little changed at $0.9838, recovering from a fresh 20-year low hit earlier in the global session.

The dollar index – which measures the greenback against a basket of six other major currencies – fell 0.3% to 111.17, slipping from a 20-year high of 111.81 reached early in the day after the conclusion of the Fed’s policy meeting on Wednesday.

The US central bank released new projections showing rates peaking at 4.6% next year with no cut until 2024. It raised its target interest rate range by an additional 75 basis points (bps) from overnight at 3%-3.25%, as generally expected. Read more

The dollar was already supported by demand for safe-haven assets after Russian President Vladimir Putin announced he would call up reservists to fight in Ukraine. Read more

Elsewhere, the Swiss franc fell after the Swiss central bank raised rates by 75 basis points, amid some speculation of a full one percentage point move. Read more

The dollar and euro both climbed around 1.5% against the franc, with the dollar remaining at 0.9808 francs and the euro at 0.9647 francs.

The Norwegian krone eased against the euro after the central bank raised interest rates by an expected 50 basis points, and said there could be a more gradual approach to tightening ahead. Read more

The euro was last up 0.5% at 10.2205 crowns.

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Currency rates at 10:43 a.m. (2:43 p.m. GMT)

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Reporting Alun John and Harry Robertson in London, Gertrude Chavez-Dreyfuss in New York and Kevin Buckland in Tokyo; Additional reporting Bansari Mayur Kamdar in Bengalaru; Editing by Kirsten Donovan

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