Yen fall sparks central bank selling speculation

The Japanese government today declined to comment on speculation it had again intervened in currency markets to weaken the yen after the unit fell sharply against the US dollar in Tokyo trade. The yen tumbled to 85.38 to the dollar, more than one yen off an intraday high of 84.34, before strengthening to 84.82. The unit also weakened to 113.75 against the euro from 112.30 earlier. The Nikkei business daily, Jiji press and Kyodo news initially quoted traders as saying the government appeared to have conducted a yen-selling intervention. But other reports said the currency move may have been the result of big yen-selling orders by banks. "I have no comment," finance minister Yoshihiko Noda said in answer to a question from a reporter at the finance ministry. Japan stepped into the currency markets on September 15 for the first time since 2004 in a bid to stem a strong yen after it hit a fresh 15-year high of 82.86 against the dollar. A strong yen puts Japanese exporters at a disadvantage because it erodes their repatriated earnings and competitiveness, in turn threatening the nation's fragile growth. "The price action is very specific and strange" though no intervention has been seen directly, Minoru Shioiri, chief manager of FX trading at Mitsubishi UFJ Morgan Stanley Securities, said on today's movement. But one trader at major Japanese bank said: "I think this is just the market over-reacting to some large-scale buying in dollar-yen by non-Japanese players," adding that the yen would likely strengthen again. Tokyo has repeatedly said it will act again in currency markets if necessary. But any repeated foray into the markets if the yen resumes upward moves may provoke ire from Japan's Group of Seven partners, after its intervention was last week criticised by politicians in Washington and Brussels. With a large trade and current account surplus, Japan has a relatively weak case to lower its currency to boost exports, some analysts argue. And while the yen recently hit 15-year highs on nominal terms, it is still below its 1995 peak when adjusted for price changes and compared with a basket of currencies used by Japan's largest trading partners, say analysts. The dollar has been under selling pressure on renewed worries that the US Federal Reserve might conduct further easing measures in light of disappointing American economic data. * AFP