Yen pulls back from precipice as traders fear intervention

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SINGAPORE — The battered yen bounced on

Wednesday as traders began doubting whether Japanese authorities

would tolerate too much more weakness, while hopes for a

breakthrough in Russia-Ukraine peace talks helped the euro and

dragged on the dollar.

The yen rose more than 1% to 121.32 per dollar,

with a meeting between Bank of Japan (BOJ) Governor Haruhiko

Kuroda and Prime Minister Fumio Kishida adding to speculation

about the level of official discomfort with a falling yen.

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It has lost more than 5% on the dollar in March.

“The BOJ is not going to be very happy with unmitigated and

really abrupt yen weakness,” said Vishnu Varathan, chief

economist at Mizuho Bank in Singapore.

“Jawboning or intervention by Ministry of Finance or BOJ

remains a risk if such excessive moves continue, and I think

that must have dawned on markets, with the convenient

coincidence of long-end U.S. yields taking a step back as well,”

he said.

“The fact that (Kuroda and Kishida) are speaking … shows

that there is a wider consultation.”

The yawning gap between a hawkish Federal Reserve and a

dovish Bank of Japan has driven the yen’s drop and on Wednesday

the BOJ extended bond purchases along the curve as part of its

effort to defend a 0.25% 10-year yield target.

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The whipsaw in the yen this week has lifted overnight

dollar/yen implied volatility to its highest since the

U.S. presidential election in November 2020.

Elsewhere moves were much smaller, with the euro

up 0.2% to $1.1111 as it edged back toward an overnight two-week

high of $1.137. Heavily sold on fears of the economic fallout

from war in Ukraine and nerves about the risk of the conflict

spreading west, it has been a beneficiary of hopes for peace.

The common currency jumped through its 200-day moving

average on the pound on Tuesday and held at

three-month high of 84.82 pence on Wednesday.

Russia’s rouble sat at 89 to the dollar after

hitting a month-high of 83.50 in offshore trade on Tuesday.

Russia has promised to scale down military operations around

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Kyiv and Ukraine proposed adopting a neutral status in a sign of

progress at face-to-face negotiations in Istanbul.

However, U.S. officials have since poured a little bit of

cold water on hopes for a deal by warning the threat to Kyiv

isn’t over.

“At least the two sides are talking,” said Commonwealth Bank

of Australia strategist Joe Capurso.

“The tentative good news about the war will benefit the euro

more than any other currency given Europe’s proximity to the

conflict and reliance on Russian energy,” he said.

The mood also proved helpful for risk-sensitive currencies

such as the Australian and New Zealand dollars. They were firm

just below recent peaks in morning trade, with the Aussie

at $0.7512 and kiwi at $0.6946.

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The South Korean won, which like the euro has

been battered by the leap in oil prices since war began just

over a month ago, jumped 1% to 1,208.5 per dollar.

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Currency bid prices at 0405 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1117 $1.1086 +0.28% +0.00% +1.1121 +1.1080

Dollar/Yen 121.7000 122.8950 -0.96% +0.00% +123.2000 +121.4500

Euro/Yen

Dollar/Swiss 0.9284 0.9307 -0.23% +0.00% +0.9313 +0.9278

Sterling/Dollar 1.3106 1.3095 +0.09% +0.00% +1.3111 +1.3091

Dollar/Canadian 1.2490 1.2503 -0.09% +0.00% +1.2508 +1.2490

Aussie/Dollar 0.7520 0.7508 +0.17% +0.00% +0.7524 +0.7504

NZ 0.6961 0.6935 +0.37% +0.00% +0.6964 +0.6933

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook. Editing by Sam Holmes.)