Analysis-Japan's re-defined intervention trigger may slow, but not derail, yen bears
By Leika Kihara
TOKYO (Reuters) — Japan's new interpretation of «excessive» yen volatility is aimed at keeping investors on guard rather than lowering the threshold for actual intervention, say experts, who expect yen bears to remain resilient until domestic monetary conditions tighten.
Japanese authorities have traditionally defined excessive moves as an abrupt spike or plunge in the yen that happen in a short period of time, such as in a single day or a week, and driven by speculative traders.
But top currency diplomat Masato Kanda said on Wednesday that steady yen falls over a protracted period could also warrant stepping into the market, suggesting that Tokyo was giving itself wider scope to intervene to prop up the currency.
«If currencies move too much on a single day or, say, a week, that's judged as excess volatility,» Kanda told reporters.
«Even if that's not the case, if we see one-sided moves accumulate into very big moves in a certain period of time, that's also excess volatility,» he said.
Based on this definition, the yen's fall by around 12% so far this year could be deemed «excessive,» some analysts say.
The remarks came in the wake of choppy trading on Tuesday, when the yen jumped abruptly after breaching the psychologically important 150 per dollar mark — a move some traders suspected was caused by Tokyo's yen-buying intervention.
While money flow data suggest there was no intervention, the price action was enough to keep yen bears at bay. The dollar/yen has stayed below 150 since Wednesday and was fetching 148.60 on Friday.
Tokyo last intervened to buy yen in September and October last year, when the currency eventually slumped to a 32-year low of 151.94 per dollar.
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