The yen rises on suspicion of intervention, 160 is considered a key level By Reuters

By Kevin Buckland, Tetsushi Kajimoto and Gertrude Chávez-Dreyfuss

TOKYO/NEW YORK (Reuters) – The yen rose against the dollar in early Asian trading on Thursday, in what traders suspected was another round of intervention by Japanese authorities to stop a sharp decline in the currency, with the 160 level seen as a key line. defense.

The dollar fell to exactly 153 yen from around 157.55 yen for reasons that were not immediately clear, but traders and analysts were quick to attribute it to dollar sales ordered by Japan's Finance Ministry to support a currency that was languishing in minimum of 34 years.

The latest move came in a quiet period for the currency pair, after the US stock market closed and with the Federal Reserve's monetary policy meeting ending hours early.

The dollar was already on the defensive after Federal Reserve Chairman Jerome Powell confirmed that the central bank's trend was toward interest rate cuts, even if the timing has been delayed due to sticky inflation. .

“There is no doubt that the Ministry of Finance intervened,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities, who says officials have set 160 yen per dollar as their “final line of defense.” .

“This morning's intervention is proof that the Japanese authorities will intervene at any time of the day and on any day of the year,” he added. “They will continue to intervene.”

The Bank of Japan's money market projections for cash balances later showed a discrepancy of more than 9 trillion yen ($57.96 billion) with brokers' expectations. It suggests an intervention of that magnitude – which would mark a new record – although other factors in addition to exchange intervention can influence the balances of the money market.

Additionally, Columbia University academic and former Finance Ministry executive Takatoshi Ito told Reuters it was plausible that Japanese authorities would intervene to indicate that they see 160 yen per dollar as their limit in the sand.

The yen has been under pressure as U.S. interest rates have risen and Japan's have remained near zero, pulling cash out of the yen and into higher-yielding assets.

Pressure has intensified since March as expectations of rate cuts by the Fed diminished, reinforcing the yen's status as a cheap financing currency.

When contacted by Reuters, Japan's deputy finance minister for international affairs, Masato Kanda, who oversees monetary policy, said he had no comment on whether Japan had intervened in the market.

A US Treasury spokesperson also declined to comment on the currency pair's movement.

Yellen told Reuters last week that monetary interventions were acceptable only in “very rare and exceptional circumstances” when markets were disordered and excessively volatile.

CHALLENGING

The difficulty in stopping the yen's decline has been made clear by the speed at which the currency has reversed direction after its rise.

At 1000 GMT, the yen was down 0.5% at 155.23 per dollar, giving up some of the ground gained overnight.

And it is still losing about 10% against the dollar this year amid diminishing bets on near-term Federal Reserve rate cuts, while the Bank of Japan has signaled it will move slowly with further policy tightening after of its first rate hike since 2007 in March.

The gap between long-term government bond yields in the two countries is 376 basis points, which helped push the yen to the weakest level since April 1990 at 160.245 per dollar on Monday. Official data from earlier this week suggested that the sharp rally that followed was due to Japanese intervention totaling around $35 billion, close to a record amount. The Finance Ministry has consistently refused to say whether it was behind the move.

($1 = 155.2900 yen)