By Ankur Banerjee
SINGAPORE (Reuters) – The yen fell to a one-year low on Monday against the dollar, breaching the key 145 level before regaining some ground as traders cautiously looked for evidence of possible intervention, while the dollar rose to more than a month high. summit.
The Japanese yen fell to as low as 145.22 per dollar in early Asian hours, its lowest level since November 10, before quickly reversing course in a choppy start to the week. It last scored 144.92, an increase of 0.03%.
Japan’s low yields on the currency have made it an easy target for short sellers and deal financing, with a widening interest rate gap between Japan and the United States keeping the yen weak.
Japan intervened in the currency markets last September when the dollar rose past 145 yen, prompting the Ministry of Finance to buy yen and push the pair to around 140 yen. The yen has fallen about 10% against the dollar for the year.
“The lack of verbal intervention so far indicates that the level of patience of the Japanese authorities may have increased following the recent adjustment of monetary policy and deflationary trends in the United States,” said Charo Chana, market analyst at Saxo Markets.
“However, traders are likely to be wary of this 145 handle and some profit taking is possible, suggesting that a move above 145 is likely to remain a slower creep.”
With the yen slowing around the level again, traders expect Japanese officials to start warning of intervention soon as they did in June.
“We think the MOF will start to ease in the 145-148 range,” said Joy Qiu, head of Asia research at FX at HSBC. “But if this does not happen, short positions in the yen are likely to be rebuilt further.”
Investors are currently holding short positions in the yen worth $7.25 billion, down 30% from last month’s 14-month high.
Analysts said Japan’s GDP and CPI data due this week are likely to be key along with US retail sales data which may continue to push Treasury yields higher.
Treasury yields rose and got another boost on Friday after data showed US producer prices rose slightly in July, more than expected, as the cost of services rebounded at the fastest pace in nearly a year.
This follows Thursday’s news that consumer prices rose moderately in July. The PPI data throws some doubts into whether the Fed has finished its rate hike cycle.
And the CME FedWatch tool showed that markets expect an almost 89% chance of the Fed getting a word on interest rates at its meeting next month, with traders not expecting further hikes for the rest of the year.
However, central bank officials emphasized that it is too early to make this call.
ANZ analysts said US consumer resilience will be in the spotlight with the release of retail sales data for July, with fuel prices expected to rise and credit conditions tightening.
The dollar index, which measures the greenback against six peers, rose 0.097% to 102.95, after touching a more than one-month high of 103.02.
The euro fell 0.12 percent to $1.0931, while the pound sterling fell 0.15 percent to $1.2675.
The Australian dollar fell 0.42% to $0.6470, while the New Zealand dollar fell 0.36% to $0.5963. Both antipodean currencies fell to their lowest levels since November earlier in the session. Currencies were undermined by disappointing trade and inflation data from China, the largest buyer of its resource exports.
Chris Weston, head of research at Pepperstone, said that while sentiment towards China is declining, this week’s high-frequency China data may need a slight cadence to trigger a strong bullish reaction in China’s proxies.
(Reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam and Lincoln Vest.)