(Bloomberg) -- The yen slid to the weakest level in about 34 years against the dollar, prompting Japan’s strongest warning yet that it will take direct action to slow the decline if needed.
The currency slipped 0.3% to 151.97 per dollar in Tokyo, passing the 151.95 level that helped trigger direct currency intervention in October 2022 and prompting Finance Minister Shunichi Suzuki to ramp up his hints of possible action to full alert.
“We are watching market moves with a high sense of urgency,” Suzuki said. “We will take bold measures against excessive moves without ruling out any options.”
The reference to bold action is generally interpreted to mean direct intervention in the currency market. The yen strengthened to 151.63 following the remark.
Read more: A Trader’s Guide to Japanese Policymakers’ Language on the Yen
“Given recent history, a breach of 152 could instigate intervention,” said Rodrigo Catril, a senior FX strategist at National Australia Bank Ltd. in Sydney. “The break of previous high has accelerated the move,” he said, referring to the dollar-yen.
Investors expect interest-rate differentials between Japan and other developed economies, notably the US, to remain wide even after the BOJ ended the world’s last negative interest-rate regime last week. That’s undermining the yen as investors favor higher-yielding currencies elsewhere.
BOJ board member Naoki Tamura said the manner in which monetary policy is managed is going to be extremely important for a slow, steady normalization to put an end to extraordinarily large-scale easing.
Those comments from the central bank’s most hawkish member didn’t do anything to change the narrative that conditions will remain easy in Japan for the time being without an aggressive hiking of rates, leaving policymakers in Tokyo waiting for a Federal Reserve rate cut to help change the dynamics.
Option traders are watching the dollar-yen pair as a rise to 152 would trigger some knockout barriers at that level, according to traders. A breach of the barrier may see the Japanese currency extend its decline against the greenback as investors who held the reverse call options will need to cover large short dollar-yen positions, said traders.
Suzuki reiterated Japan’s view that it won’t rule out any options in dealing with excessive currency moves.
Authorities in Tokyo spent ¥9.2 trillion ($60.6 billion) in 2022 to prop up the yen on three occasions, each time insisting that they were not protecting any specific currency level.
--With assistance from Toru Fujioka, Beth Thomas, David Finnerty, Ruth Carson, Yoshiaki Nohara, Emi Urabe and Momoka Yokoyama.