Japan could intervene to protect Yen if Fed hikes

investmentnews.com:

Currency traders preparing for this week’s policy decisions from the Federal Reserve and Bank of Japan got fresh reminders that Japanese officials stand ready to intervene in the currency market with possible US backing if swings in the yen are deemed excessive.

Japan’s top currency official Masato Kanda said Wednesday he’s keeping in close contact with his counterparts in the US on a day-to-day basis, and both sides agree that excessive currency moves are unwelcome. 

“We maintain extremely close communication with foreign authorities, especially the United States, on a regular basis,” Kanda said.

US Treasury Secretary Janet Yellen said earlier that any intervention by Japan to prop up the yen would be understandable if it is aimed at smoothing out volatility. 

Kanda said he won’t rule out any steps to address unruly markets if deemed necessary, and he continues to monitor developments with an extreme sense of urgency. The yen strengthened only a whisker after Kanda’s remarks during morning trading in Asia. It gave up those gains and slid past 148 versus the dollar to the weakest level this year in the afternoon. It was at 148.15 as of 4:49 p.m. in Tokyo.

Kanda was speaking ahead of a decision later Wednesday by the Fed, where authorities are expected to hold rates steady. The yawning interest-rate gap between Japan and the US has been a key factor in yen weakness, making the higher-yielding dollar more appealing. 

BOJ Governor Kazuo Ueda and his team are also expected to stand pat when they wind up a two-day policy meeting on Friday, a year to the day since Japan’s first intervention to prop up the yen since the late 1990s.

“Markets will be paying attention to how Ueda describes the relationship between foreign exchange