The US dollar edged higher against the weaker Japanese yen on Tuesday, after climbing on Monday when the finance minister of Japan stated that Tokyo was ready to intervene in the currency market.
USD/JPY rallied by 0.45 percent to 108.80, the highest level since April 28, after ending the prior session with gains of approximately 0.94 percent.
The greenback had plunged to 18-month lows of 105.05 against the Japanese yen last Tuesday after the Bank of Japan kept rates unchanged, defying the market expectations for additional easing.
The Finance Minister of Japan Taro Aso stated on Monday that financial authorities are ready to intervene in the currency market if excessive moves in the JPY are are sufficient to impact the economy of the Asian country.
The Japanese yen initially displayed little reaction to the statements amid the belief that officials are not likely to take measures to weaken the yen in the absence of support for such a step.
Late in April, the Treasury Department of the United States added Japan to a watchlist of countries that it is keeping an eye on to gauge whether their foreign exchange policies offer an unfair trade advantage.
In its report, the US Treasury pointed out that the present USD/JPY market was “orderly” and reiterated all countries must follow by G20 and G7 commitments regarding exchange rate policies, broadly seen as a call for Japan to limit currency market interventions.
Aso stated on Monday that the move of the US Treasury Department to put Japan on a watchlist will not constraint the currency policy of Japan. On Tuesday, Aso reiterated that Japan will intervene in the currency market if one-sided moves in the JPY continues.
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