Tom Westbrook

SINGAPORE (Reuters – On Tuesday the yen began to fight for its footing after its worst session since 16 months. The Bank of Japan lowered bond yields, at a moment when they are increasing sharply around the world.

After falling 2.4% overnight to 125.10 USD, the Japanese currency recovered to 124.24 in Tokyo morning volatile trade.

The U.S. currency was stable in other currencies, holding the euro at $1.0988 while the Australian dollar held steady at $0.7483. [AUD/]

Japan’s central banks bought bonds in excess of $500 million on Monday. They have promised to continue unlimited purchases for three additional days to maintain their 10-year yield goal of 0.25%.

This is a sign of determination to maintain Japan’s monetary policies ultra-easy. It also highlights the stark contrast between a more hawkish-sounding U.S. Federal Reserve.

This month, it is almost down 7%. On a rebound, however, it was nearly 10%. It is evident that many investors have doubts regarding the viability of Japan’s bond yields. [JP/]

“Anyone that watched the RBA cap’ blow is probably excitedly and logically short JGBs right now, hoping for a similar movement in Japan rates,” said Donnelly of Spectra Markets analytics company. This refers to the Reserve Bank of Australia’s decision in November to abandon its yield target.

Minutes of Tuesday’s Bank of Japan March meeting were published. They showed that even with signs of rising inflation, policymakers insisted on keeping monetary policy extremely loose.

Economists believe there is growing pressure to shift, if persistent weakness in the yen exacerbates inflation and raises import costs, especially for energy. They think that level 125, which was roughly at dollar/yen’s peak in 2015, would be a crucial level.

Kentaro Koyama chief economist at the Japan Economic Association stated, “Japanese Yuen Depreciation Is a Big Problem for the Japanese Economy, Because the economy, especially the households, is facing rising inflation and yen could accelerate that.” Deutsche Bank Tokyo, (DE)

“If the dollar/yen ratio exceeded 125, I expect severe verbal intervention.”

Shunichi Suzuki, Japan’s Finance Minister, stated Tuesday that Japan would closely monitor foreign exchange markets movements to prevent “bad yen weakness”.

The New Zealand dollar, which was $0.6889 weaker than the other majors, was slightly under pressure while sterling was at $1.3081. [GBP/]

Later in the day, data on European consumer confidence and U.S. job opportunities figures will be available.

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Prices for currency bids at 0105 GMT

Description: RIC U.S. Last Close Pct. Change YTD High Bid Low

Previous change

Session

Euro/Dollar

$1.0975 $1.0988 -0.10% -3.45% +1.0998 +1.0969

Dollar/Yen

123.8750 123.8650 +0.20% +7.91% +124.3000 +123.4000

Euro/Yen

135.98 136.13 -0.11% +4.34% +136.5100 +135.5400

Dollar/Swiss

0.9342 0.9345 -0.02% +2.43% +0.9356 +0.9334

Sterling/Dollar

1.3083 1.3095 -0.10% -3.27% +1.3106 +1.3080

Dollar/Canadian

1.2522 1.2517 +0.04% -0.96% +1.2530 +1.2515

Aussie/Dollar

0.7479 0.7492 -0.16% +2.90% +0.7507 +0.7475

NZ

Dollar/Dollar 0.6891 0.6897 -0.07% +0.69% +0.6908 +0.6889

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