Yen Near 150 to Dollar Raises Odds of Jawboning From Japan

(Bloomberg) — The yen has performed worse than any of its major peers so far this year, renewing speculation that Japanese authorities will be drawn in to defend the currency.

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While there’s no indication of imminent intervention by the government, the yen has weakened about 4.8% versus the greenback this year and is just two yen short of 150 to the dollar. That level was last seen in November, when officials in Tokyo cautioned that they could take action to arrest its slump.

With all 51 respondents in a Bloomberg poll expecting the Bank of Japan to keep its ultra-easy monetary setting unchanged at its policy meeting Tuesday, some analysts expect further depreciation. Swap markets price in less than 1% chance of a rate hike on Tuesday, compared with a 26% probability a month ago.

As the yen weakened last week, Japan’s Finance Minister Shunichi Suzuki said on Friday that the government was closely watching movements in the foreign exchange market. The government typically offers a series of verbal warnings that gradually intensify before taking real action in the market.

“It is possible the authorities will intensify their tones of warning should the dollar-yen rise above 150,” said Junichi Ishikawa, senior market strategist at IG Markets Ltd. “Although the possibility of real action may be low amid the strong dollar, concerns about the intervention will probably increase in the market.”

Pressure on the yen has mounted after a powerful earthquake on Jan. 1 likely made the BOJ more cautious about ending the world’s last sub-zero interest rates. Strong US economic data also contributed to the dollar’s advance against the yen as speculation waned that the Federal Reserve will start cutting its benchmark rate in the near future.

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Asset managers switched to wagering against the yen after four weeks of betting on it, according to data from the Commodity Futures Trading Commission in the week through Jan. 16.

“It is surprising the yen has weakened so much in less than a month,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “At the end of last year, many people, including myself, were expecting the yen to gain to the mid-130s against the greenback.”

–With assistance from Yumi Teso.

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