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 Japanese officials stepped up their attempts to talk the yen down,
with Finance Minister Taro Aso hoping that the G20 finance leaders
gathering in Shanghai this month will consider a global policy
response to the recent market turmoil.
Major central banks including the European Central Bank, the Bank of
Japan and the Swiss National Bank have all adopted negative rates to
boost inflation. But these are weighing on banks' earnings and
dragging down stocks globally, threatening business confidence and
growth prospects.
The dollar was up 0.15 percent at 112.55 yen <JPY=>, having fallen
to 110.985 yen on Thursday, its lowest level since October 2014. It
was on track to shed 3.7 percent for the week, its worst since
October 2008.
The dollar had jumped to 113 yen in thin trading in Europe on
Thursday, leading to speculation that Japanese authorities were
checking currency rates, a step that often precedes intervention.
A government official declined to comment on intervention on Friday.
"The introduction of negative interest rates has certainly not
weakened the currency," Commerzbank currency strategist, Lutz
Karpowitz, said. "Of course, that is not at all what the Bank of
Japan had hoped to achieve. The Japanese officials really need a
weak yen unless they want their own inflation projections to become
a laughing stock."
The yen's ascent followed the Bank of Japan's move to adopt negative
interest rates on Jan. 29, under which banks have to pay interest on
certain deposits held at the BOJ. The dollar hit a high of 121.70
yen, before sliding stocks, slowing Chinese growth and falling crude
oil prices sent investors into perceived safe-haven currencies.
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Some traders said the dollar could to drop to 110 yen, a level not
seen since late 2014, if risk appetite falls further. Barclays cut
its dollar/yen forecasts, saying the greenback will fall to 95 yen
by the end of the year - more than 20 percent lower than the 120 yen
previously forecast.
One-month dollar/yen implied volatility, an indicator of how much
currency movement is expected in the weeks ahead, surged to 15.9
percent <JPY1MO=> on Friday, its highest since June 2013, up more
than seven points from levels seen this month.
The euro fell 0.4 percent to $1.1280 <EUR=>, not far Thursday's high
of $1.1377, its highest since October 2015.
(Editing by Louise Ireland)
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