By Ozan Ergenay and Alun John
SINGAPORE/LONDON (Reuters) -The dollar was riding high on Thursday after Federal Reserve minutes made a December U.S. rate cut seem less likely ahead of long-delayed U.S. jobs data for September.
The greenback’s strong gains against the yen prompted traders to ask whether Japanese authorities might step in to stop their currency sliding further.
The dollar rose as high as 157.78 yen, its strongest since January, putting the Japanese currency on track for a fourth daily decline.
The yen’s latest leg lower began after Finance Minister Satsuki Katayama said there had been no specific discussion about foreign exchange at a meeting with Bank of Japan Governor Kazuo Ueda.
The yen was on the back foot heading into the start of U.S. trading, leaving the dollar up 0.3% at 157.64 yen.
Since Prime Minister Sanae Takaichi was elected leader of the ruling party last month, the yen has depreciated by around 6% despite rising Japanese bond yields, with markets uneasy about the scale of borrowing needed to fund her stimulus plans.
Japanese Finance Minister Satsuki Katayama said on Tuesday the government was closely watching the market “with a high sense of urgency.”
“I think the intervention levels are probably higher up, they were closer to 162 last time around. So in that respect, I believe there’s further room for the currency to weaken before they eventually do consider intervening,” said Kenneth Broux, head of corporate research FX and rates at Societe Generale.
“We don’t really know what conversations are being held between the government and the central bank, which is adding a little bit of uncertainty of whether the BOJ is going to be more inclined to intervene … So, it is very unclear,” Broux said.
He added that this explained why volatility in the yen has risen quite sharply.
Traders now figure Japanese authorities may intervene somewhere around the 160 mark, as they did last July, or if there are any more sudden moves.
Chief Cabinet Secretary Minoru Kihara said moves were sharp, one-sided and concerning on Thursday.
JAPANESE STIMULUS PACKAGE
Japan’s new government is preparing a comprehensive economic stimulus package worth more than 20 trillion yen, the biggest since the COVID pandemic, that Takaichi is expected to unveil on Friday.
Broux said the market is now waiting to see how these measures will be funded and how much debt is going to be issued, and eventually what the BOJ’s response will be.
“Yields are really ramping up in Japan and investors and markets clearly are a little bit concerned about borrowing and funding levels,” he added.
FED MINUTES SUGGEST DECEMBER RATE CUT IS UNLIKELY
Beyond Japan, the euro, the Swiss franc, the Australian dollar and sterling all fell against the dollar after minutes from October’s Federal Reserve meeting showed “many” participants had already ruled out a December cut, while “several” others saw a December cut as likely.
“In Fedspeak, ‘many’ means more than ‘several’, so I think there’s a bit of a hawkish message that’s supporting the dollar,” said Bank of Singapore strategist Moh Siong Sim.
In the U.S., expectations for a December cut have fallen below 25%, after being priced as a near-certainty a month ago.
The euro was last down 0.2% at $1.1513, a two-week low, while sterling was steady on the day at $1.3060, but also at its lowest since early this month.
That left the dollar index, which tracks the U.S. currency against six others, at 100.29, testing a six-month high hit in early November.
The next key data point for the Fed, and in turn the dollar, is September’s nonfarm payrolls data. The numbers will be released at 8:30 a.m. ET (1330 GMT) on Thursday after having been delayed by the U.S. government shutdown.
Because they are several months out of date, the question for investors will be whether the figures are sufficiently surprising to offset their staleness.
(Reporting by Ozan Ergenay and Alun John in London, additional reporting by Tom Westbrook in Singapore; Editing by Jamie Freed, Gareth Jones and Mark Heinrich)
