The dollar hit a 10-day high against the yen on Monday after Japan’s finance minister said outright that Tokyo was ready to intervene in the currency market if yen moves are volatile enough to hurt trade and the economy.
In a mixed day for stock markets, the yen’s falls helped generate some limited gains for the Nikkei, while a strong batch of industrial orders numbers out of Germany helped European shares recover from their worst week since mid-February.
But Shanghai sank almost 3 per cent after worse-than-expected Chinese trade numbers. Those added to the more general doubts about the pace of global growth and the likelihood of rises in interest rates this year generated by Friday’s US jobs data.
An almost 15 per cent surge for the yen has been the big currency story of the past six months and traders remain sceptical over the chances of Tokyo making good on repeated threats to counter the move in the absence of global support.
Japan is the developed world’s most consistent interventionist on markets over the past two decades as it strives to find a way out of a cycle of low growth and low inflation.
But previous bouts of yen selling have tended to come with at least tacit blessing of its international partners and this time Washington seems opposed.
“Finance Minister Aso stated strongly that sudden yen strength or weakness is bad and that Japan has the means to intervene,” said Lee Hardman, a currency analyst with Bank of Tokyo-Mitsubishi UFJ in London.
“He also attempted to alter market expectations that US opposition will prevent Japan from intervening. Overall, the comments do not significantly change our view that direct intervention to dampen yen strength remains unlikely in the near-term.”
The dollar, which hit an 18-month low against the yen last week, was up almost half a per cent in morning trade in London at 107.60 yen. That is down from 123 yen last December.
Wild fire
World oil prices gained for a third straight day on worries over problems with supplies due to devastating wildfires in Canada.
The recovery in the value of crude this year has tended to be a positive for stock markets, encouraging hopes that consumer prices will also start rising again, easing the burden of debts weighing on companies and governments and allowing more investment.
Against that is the impact on oil companies’ operations of shutdowns caused by the fires. Dealers said that European-listed oil majors were shielded by the impact being chiefly on Canadian operations, with BP shares up 0.2 per cent.
German industrial orders also offered some reason for optimism, rising more than expected and by the steepest rate in nine months, due to strong foreign demand especially from countries outside the euro zone.
The pan-European FTSE 300 index, Germaný’s DAX and France’s CAC all rose by more than 1 per cent.