The yen edge higher on Thursday, as the recent strong dollar and prompting investors have covered positions against a backdrop of potential event risks, as well as the chief of Fed Janet Yellen’s speech.
The greenback settled close to recent ranges, fueled by investors that eyes for further signals from Yellen on Friday as to whether a U.S. rate hike will proceed. In addition, Japan’s planned sales tax hike for the following year is closely watched by investors as well.
Subsequently, the yen surprisingly declined as illiquid conditions have prompted stop-loss orders and have sent Japan’s currency to drop by about 109.42 per dollar from a session high of 110.23. It changed hands at 109.69, down by 0.4 percent in late trade.
A trader in Tokyo said, "The sudden move shows how jumpy everyone is."
An interview with Japan’s vice-minister of finance for international affairs Masatsugu Asakawa told a research firm that direct currency intervention will stay in the toolbox of the ministry, according to some market participants.
However, some traders who don’t see any fresh trading catalysts were forced to buy back the Japanese unit as it edge higher compared to other currency pairs as well as the greenback.
Meanwhile, the euro lost about 0.2 percent, hitting 122.70 yen after posting session lows of 122.25 from a session high of 122.93. The Australian dollar dropped 0.3 percent and hit 79.05 yen after declining to 78.49 from a session high of 79.31.
As Japan’s authorities have publicly condemned against the robust record to an 18-month highs of the yen earlier this month, a few policymakers mentioned they’re confident that the yen will not intervene initiatives to restore exports and the economy.
Furthermore, investors remained eager for potential developments towards the timing of Japan’s sales tax hike.
The Finance Minister of Japan Taro Aso mentioned in a meeting last week that Japan will proceed with a rake hike as planned. However, he cleared that the country hasn’t made a pledge to the international community that it will proceed with the tax increase.
Conversely, the top government spokesman of the country has denied a report, citing that the Prime Minister Shinzo Abe seemed to delay the sales tax increase, which is scheduled for the following year.
Hearing this, the head of fixed-income research at U.S. Bank Wealth Management Jennifer Vail said, "You have conflicting opinions coming out of the same government, and I think thats creating some noise in the market,"
"Anytime you have conflicting major players in the market place, it creates confusion, and I think the yen will likely struggle without clarity on whether theyre going to delay the sales tax hike." she added.
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