Yen slips after rallying on suspected intervention

TOKYO/NEW YORK — The yen edged back on Thursday following another surge against the dollar that fueled speculation Japanese authorities had intervened for a second time this week, after US Federal Reserve chief Jerome Powell warned interest rates would stay higher for longer.

The dollar fell sharply to precisely 153 yen from about 157.55 yen for reasons that were not immediately clear, but traders and analysts were quick to say it was dollar selling ordered by Japan’s Ministry of Finance to support a currency languishing at 34-year lows.

The latest move came in a quiet period for the currency pair, after the US stock market had closed and with the Federal Reserve’s monetary policy meeting ending hours earlier.

On Wednesday, the Fed left interest rates unchanged at a 22-year high of 5.25 percent to 5.5 percent, a decision that came after the Commerce Department reported on Friday that the US personal consumption expenditure price index, the Fed’s preferred inflation measure, ticked up to 2.7 percent in March.

Amid stubborn inflation that shows no signs of abating, US GDP growth slowed significantly to an annual rate of 1.6 percent in the first quarter, marking a sharp drop from the 3.4 percent in the fourth quarter, according to data released last week.

“We are taking signal (that) it’s likely to take longer for us to gain confidence that we’re on a sustainable path to 2 percent inflation,” Powell told reporters after the twoday policy meeting.

The yen has been under pressure as US interest rates have climbed and Japan’s have stayed near zero, driving cash out of yen and into higher-yielding assets.

The pressure has intensified since March as expectations for Fed rate cuts receded, reinforcing the yen’s status as a cheap funding currency.

The difficulty in arresting the yen’s slide has been made clear by the speed at which the currency has reversed direction after its spike.

As of 1000 GMT, the yen was 0.5 percent lower at 155.23 per dollar, giving up some of the ground it gained overnight.

And it remains down about 10 percent against the dollar this year amid receding bets for near-term Fed rate cuts, while the Bank of Japan has signaled it will go slow with further policy tightening after its first rate hike since 2007 in March.

The gap between long-term government bond yields in the two countries is a yawning 376 basis points, which pushed the yen to the weakest since April 1990 at 160.245 per dollar on Monday.