By Vidya Ranganathan

SINGAPORE, (Reuters) – The yen saw a temporary respite after falling to new lows of two decades following Japanese policymaker comments Monday. Holidays also limited the U.S. Dollar’s ranges in relation to most currencies.

In early Asian trading the yen dropped to 126.795, a low of two decades. However, Bank of Japan Governor Haruhiko Koroda and Shunichi Suzuki raised concerns. The currency rebounded to 126.25. However, the rally was short-lived as it quickly fell back to 126.57.

Because of the Easter holiday in Australia and Hong Kong, which slowed trading in Asian currencies, the dollar held strong. It was supported by a Federal Reserve that is hawkish, while the euro suffered from uncertainty over when euro zone rates will rise.

On Monday, the yen had a nearly 10% decline from its March beginning levels. The yen fell almost 2% against dollar last week. This was the sixth consecutive losing week.

BBH Global Currency Strategy’s Head of Currency Strategy Win Thin stated that there were no significant chart points to stop the dollar from a possible run-up in its favor against the Japanese yen. This led to a 2002 peak near 135.15. 

“We believe there is low risk for FX intervention. Until the BOJ changes its ultra-dovish stance, the monetary policy divergence argues for continued yen weakness and intervention would likely have little lasting impact,” Thin wrote.

Japanese policymakers voiced concern about the declining yen after it fell to 125/$ on April 11.

Analysts believe that the Bank of Japan will acknowledge inflationary pressures during its April 27-28 review of its monetary policy. However, the Bank of Japan is expected to not change their policy.

Kuroda said Monday that even though a weaker yen might impact company profits, it was too early to discuss any withdrawal from the current easy-to-follow policy.

Fumio Kishida, the Japanese prime minister, stated that Friday’s central bank’s monetary policies are aimed at reaching its inflation target of 2% and not manipulating currency rates.

The Finance Minister Suzuki warned that the weakening yen could be detrimental to Japan’s economy. He stated this several times over recent weeks.

JPMorgan (NYSE 🙂 Analysts at JPMorgan Benjamin Shatil & Sosuke Nakamura, Securities analysts said that using the term “bad”, marked a change of tone.

On Friday they stated that “we have long advocated for the BOJ to blink if the yen weakens sufficiently to cause political consequences,”

“The risk to running short yen positions will be any capitulation in Kuroda’s thus-far positive assessment of yen weakness.”

Concerns about global supply have pushed up oil prices on Monday. [O/R]This is adding to the difficulties for Japan’s energy-importing economy.

HAWKISH FED

Supported by unremitting Fed officials’ hawkish remarks, the dollar held steady at a high of two years against the euro.

Flat around $1.08 was the euro, one point below last week’s $1.0758 low, an unsurpassed level since April 2020.

Last month, the Fed delivered the first of what will likely be a series interest rate rises this year and next in an effort to lower inflation to its 40-year-high. John Williams, President of the New York Fed said that a one-half point rate increase next month is “very reasonable”, and Loretta Mester, President of Cleveland Federal Reserve Bank indicated that rates must rise rapidly.

Last week, however, the European Central Bank stated that they would end their signature stimulus plan in the third-quarter. It also stressed the lack of a clear timeline for when ECB rate rises, as well as the flexibility and ability to change policy quickly.

The Australian dollar was hovering at $0.7383, its lowest point in over a month.

The cryptocurrency bitcoin remained at the $40,000 mark. Last change was $39,748.