FOREX-Dollar ignores alleged Japanese intervention; eye british politics
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By Amanda Cooper
LONDON, Oct 24 (Reuters) – The dollar rallied on Monday, shaking off another burst of suspected Japanese intervention and sending China’s offshore yuan to record highs, while the pound faltered as Britain’s Conservative Party rushed to choose their third chef this year.
The yen hit a low of 149.70 to the dollar overnight before hitting a high of 145.28 within minutes, suggesting that the Bank of Japan, acting for Japan’s Ministry of Finance (MOF), was intervened for a second day. The yen was last at 149.05, down 0.9% on the day against the greenback.
“As with the previous intervention cycle when the dollar/yen climbed above 145.00, it appears that the half-life of the impact of the intervention is very short indeed,” said John Hardy. , head of foreign exchange strategy at Saxo Bank.
Overnight yen volatility hit its highest level since Sept. 21, the day before the BOJ intervened to support the currency for the first time since 1998.
Japan likely spent a record 5.4 trillion to 5.5 trillion yen ($36.16 billion to $36.83 billion) in its yen-buying intervention last Friday, according to brokerage firm estimates. of the Tokyo money market.
Traders also suspect that the BOJ has intervened more than once in the past month to support a currency that has fallen 22% this year against the dollar.
The Japanese government has pledged to keep borrowing costs extremely low, which means the BOJ is also intervening in bond markets to keep yields in check.
“Clearly the market does not view the current framework as sustainable and every day for the past week the BoJ has had to step in with special bond buying operations to keep the 10-year government bond at 25 Japan’s 10-year swaps are trading at 65.5 basis points, and that paints an appropriate picture,” said Pepperstone strategist Chris Weston.
The dollar held firm on Friday’s report from the Wall Street Journal that Federal Reserve officials are likely to debate the scale of future interest rate hikes, keeping Treasury yields from drifting higher. the rise.
The euro was last down 0.1% at $0.9851, while the Chinese offshore yuan fell to a new high against the dollar at 7.3227.
Chinese Premier Xi Jinping secured a third term as head of a precedent, choosing a top governing body made up of loyalists. Xi is likely to stick to his zero COVID policy and could favor state growth over the private sector, analysts say.
U.S.-listed shares of Chinese companies tumbled in pre-market trading on Monday and Hong Kong shares posted their biggest one-day drop in 14 years.
The pound was swept away by news former Prime Minister Boris Johnson had dropped out of the Tory leadership race and was last flat at $1.1302, down from an overnight high above 1.14 $.
Former Chancellor Rishi Sunak has emerged as the favorite to become Britain’s next prime minister.
“The sterling price action appears to assume the advent of a Sunak/Hunt ticket as Prime Minister/Chancellor and focus on restoring some of the UK’s lost fiscal credibility” said ING strategist Chris Turner.
“After the failure of the Trussonomics experiment, the challenge facing the new team will be more difficult than the one that existed earlier this summer and this is probably a reason why international investors will not want to chase the GBP / USD above the 1.15 level,” he added.
(Additional reporting by Vidya Ranganathan and Kevin Buckland in Singpoare and Stella Qiu and Wayne Cole in Sydney; Editing by Bernadette Baum, Kirsten Donovan)