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Dollar leaps vs yen after BOJ intervenes

TOKYO: The dollar jumped against the yen late on Wednesday in Tokyo after the Bank of Japan (BOJ) intervened in the currency market, according to dealers.

The Japanese central bank stepped into the market when the dollar was trading around 104.80/90 yen, dealers said. The dollar quickly leapt to a high of 105.75 yen, and the BOJ was still intervening at that level, dealers said.

The BOJ last intervened a week ago, selling yen for dollars in an effort to weaken the Japanese currency, which has appreciated 6.4 percent against the dollar since Feb. 22.

Japanese authorities fear that a stronger yen imperils the nation's recovery from its worst recession in over 50 years, by depressing Japanese exports and the value of Japanese companies' overseas earnings.

By late afternoon, the dollar was quoted at 105.58/68 yen, compared with 105.20 yen in late US trade on Tuesday.

"The dollar gained around one yen. So far the impact of the intervention was limited," Takahiro Ninomiya, manager at Toyo Trust Bank, told Reuters Television.

"The BOJ likely wants to prevent the dollar from falling below 104.50 yen before the end of fiscal year" on March 31.

Dealers said the BOJ only bought dollars during Tokyo trading hours, but said buying of euros with yen is likely during European trading hours.

"It is possible that the BOJ will intervene on its own during European hours," Ninomiya said.

The euro rose to a high of 102.57 yen in Tokyo, up from 101.70 yen in late US trade on Tuesday.

The euro was slightly easier against the dollar, standing at $0.9673/75 versus $0.9680 in late US on Tuesday.

Since the BOJ last intervened on March 8, the yen had appreciated 2.6 percent against the dollar.

The yen had surged since on Monday when surprisingly strong capital spending data was released, restoring confidence that the economy was clearly on a growth path.

Dealers said the BOJ appeared to have spent much more yen buying dollars on Wednesday that it did earlier this month. Still, dealers wonder whether the dollar's gains can be sustained, especially as a large amount of offers exist above 106 yen. Overnight, the Japanese yen muscled to 104.60 yen, and strengthened to a lifetime high of 100.60 versus the euro.

"The dollar and the euro have been at sensitive levels, so it was just a matter of a time (until the BOJ intervened)," the bank dealer said.

Since the BOJ last intervened on March 8, the yen had appreciated 2.6 percent against the dollar.

The yen had surged since Monday when surprisingly strong capital spending data was released, restoring confidence that the economy was clearly on a growth path.

Dealers said the BOJ appeared to have spent much more yen buying dollars on Wednesday that it did earlier this month. Still, dealers wonder whether the dollar's gains can be sustained, especially as a large amount of offers exist above 106 yen.

"The dollar gained around one yen. So far the impact of the intervention was limited," Takahiro Ninomiya, manager at Toyo Trust Bank, told Reuters Television.

"The BOJ likely wants to prevent the dollar from falling below 104.50 yen before the end of fiscal year settlements at the end of the month but the yen's bias will likely remain on the upside for a while. Japanese customers such as exporters are showing selling interest." Dealers said the BOJ probably waited to act until yen call options with a strike price of 105.00 yen matured in the afternoon to make its intervention more effective. Such options kept the spot rate stuck much of the day.

But the yen's strength versus the Aussie dollar and British sterling had weighed on the dollar against the yen.

Dealers said the BOJ so far had been seen buying only dollars against the yen, but said buying of euros with yen is likely during European trading hours.

"It is possible that the BOJ will intervene on its own during European hours," Ninomiya said.

The euro also rose to a high of 102.57 yen, compared with 101.70 yen in late US trade.

The euro was slightly easier against the dollar, standing at $0.9673/75 versus $0.9680 in late US on Tuesday.

The euro's downside is supported by speculation that the European Central Bank will raise key interest rates when its governing council meets on Thursday. -Reuters