Yen Weakens Past 160 per Dollar, and Japan's Finance Minister Warns of Action

The yen weakened past 160 per dollar on Friday, and Finance Minister Satsuki Katayama said Japan would respond appropriately to currency volatility, according to Reuters reporting carried by Investing.com. The currency reached 160.03 per dollar, its weakest since early September, after markets revised their view of the Federal Reserve's rate path toward more hikes.

Katayama said the market was showing sharp, one-sided moves and that Tokyo would keep working closely with the US Treasury, Bloomberg reported. On Thursday, Atsushi Mimura, Japan's top currency diplomat, said it was "too early to forget" the summer intervention. Japan bought yen on three days between July 30 and August 3 and spent a record 15.4 trillion yen. The US bought yen on July 31, its first yen-buying intervention since 1998.

The usual tools for forecasting the yen have become less reliable. The Japan Times reported that interest-rate differentials have become weaker guides to the currency, which has made it too difficult for some investors to trade. The difficulty has a cause. Intervention can arrive without warning, and the Bank of Japan's December meeting is approaching. Both can move the price sharply in either direction.

The weakness follows directly from the dollar's rise. The Fed is pricing hikes and the Bank of Japan is moving slowly, so the gap in yields still favors the dollar. Tokyo can sell dollar reserves to slow the decline, but it cannot remove the gap.