By Makiko Yamazaki and Rocky Swift
TOKYO, June 3 (Reuters) – The yen weakened to levels that preceded intervention by Tokyo last month, prompting fresh warnings by the finance minister on Wednesday ahead of a highly anticipated speech by the central bank governor.
The yen briefly touched the critical 160 per dollar line in early trading, the first time since April 30 and wiping out all gains bought by a record amount of intervention by Japan in foreign exchange markets.
“With regard to foreign exchange, we will respond appropriately at any time as necessary,” Finance Minister Satsuki Katayama said at a press conference after the government finalised an extra budget.
Bank of Japan Governor Kazuo Ueda will deliver a speech later in the day that could reveal his thinking on the prospects of a June rate hike as the war in Iran heightens price pressures.
“Governor Ueda is likely to maintain a positive stance toward a rate hike, while also referring to uncertainty surrounding the situation in the Middle East,” said Hirofumi Suzuki, chief FX strategist at SMBC. “He is likely to avoid providing any definitive signal…as a result, his comments may not give dollar/yen much clear direction.”
But a key question for markets is whether fiscally dovish Prime Minister Sanae Takaichi and her government are on board with further tightening by the central bank.
Katayama said she is largely in alignment with the BOJ governor on various aspects, adding that Ueda and Prime Minister Sanae Takaichi held “very constructive discussions” in their recent meeting.
Data on Friday showed that Japan spent 11.7 trillion yen ($73.14 billion) since April to support the yen in what was the largest-ever intervention round in a month.
The currency slid to a near two-year low of 160.725 per dollar on April 30 before jolting to as strong as 155 in what is believed to be multiple bouts of yen-buying intervention.
But the currency has ground weaker ever since, spurring expectations of further action by Tokyo to defend its currency.
“Intervention odds click above zero as 160 nears and click substantially higher if 162 trades,” Brent Donnelly, president at analytics firm Spectra Markets, wrote in a note.
($1 = 159.9600 yen)
(Reporting by Makiko Yamazaki; Editing by Shri Navaratnam and Sam Holmes)
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