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 The yen's surge, up around 9.5 percent against the dollar this year
despite the imposition of negative rates, led to more warnings of
action from the Japanese, who are concerned about a strong currency
dampening exports.
A senior Japanese finance ministry official said steps would be
taken in the market as needed, and Bank of Japan Governor Haruhiko
Kuroda also repeated the central bank would ease policy further if
needed, but there are doubts over how effective that would be.
The dollar fell 1.4 percent to 108.02 yen <JPY=>, its weakest
against its Japanese counterpart since October 2014. The euro slid
to 123.32 yen <EURJPY=R>, its lowest in a month, with subdued stock
markets also underpinning the safe-haven yen.
"We are in a broad-based soft dollar environment, and given the yen
is cheap in relation to its long-term fundamentals, it is not
surprising it is outperforming," said ING currency strategist Petr
Krpata.
"The rise is leading to speculation of intervention by the
Japanese," Krpata added. "But we think the bar for that is pretty
high and we are not seeing any major risk-off event."
The market is sceptical about the chances of yen-selling
intervention ahead of a G7 summit that Japan is hosting in May,
analysts said.
YEN FOCUS
"(Prime Minister Shinzo) Abe does not want to get into trouble at
the G7 summit for the BOJ focussing too much on the yen," said
Commerzbank currency analyst Anthe Praefcke.
"Once the visitors have left, he or Kuroda can refer to 'disorderly
movements' and 'excessive volatility' on the FX markets to their
hearts content – the two tolerated exemptions for interventions – so
as to be able to intervene to weaken the yen," Praefcke said.
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The dollar index, which tracks it against a basket of six major
currencies, fell to 94.015 <.DXY>, its lowest since October 2015. It
recovered to 94.414, still flat on the day. Traders will watch for
comments from Fed chair Janet Yellen, who takes part in a panel
discussion later in the day.
Minutes from the Fed's March 15-16 policy meeting suggested the
central bank is unlikely to raise interest rates before June, due to
widespread concern among policymakers over their limited ability to
counter the blow of a global slowdown.
The minutes showed debate over whether they might increase rates in
April, with "a number" of them arguing that headwinds to growth
would probably persist, and many urging caution about raising rates.
The euro was down 0.2 percent at $1.13805 <EUR=>, not far from a
5-1/2 month high of $1.1438 touched last week. Minutes of the last
European Central Bank meeting will be released on Thursday, with
traders also looking to a speech later in the day by its president,
Mario Draghi.
(Additional reporting by Masayuki Kitano; Editing by John
Stonestreet and David Holmes)
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