Yen retreats from the brink as traders fear Reuters intervention

By Tom Westbrook

SINGAPORE (Reuters) – The yen rallied on Wednesday as traders began to doubt whether Japanese authorities would accept too much weakness, amid hopes of a breakthrough in the markets. Russia-Ukraine peace talks helped the euro and pulled the dollar up.

The yen rose more than 1% to $121.32/USD, after a meeting between Bank of Japan (BOJ) Governor Haruhiko Kuroda and Prime Minister Fumio Kishida fueled speculation about the extent of official discomfort with the currency. Yen fell.

It lost more than 5% against the dollar in March.

“The BOJ will not be very pleased with the yen weakening suddenly and really suddenly,” said Vishnu Varathan, chief economist at Mizuho Bank in Singapore.

“Spoofing or interference by the Treasury or the BOJ remains a risk if such outrageous moves continue, and I think that must already be in the markets,” he said. a convenient coincidence that long-term US yields also took a step back.”

“The fact that (Kuroda and Kishida) are speaking … suggests that there is a broader consultation.”

A wide spread between the hawkish Federal Reserve and the dovish Bank of Japan sent the yen lower, and on Wednesday the BOJ extended its bond-buying curve as part of an effort to protect its target. spend 0.25% yield over 10 years.

The strong yen volatility this week lifted the dollar/yen overnight showing volatility to the highest level since the US presidential election in November 2020.

Other moves were much smaller, with the euro surging 0.2 percent to $1.1111 as it bounced back to an overnight two-week high of $1.137. Sold heavily on fears of an economic downturn from the war in Ukraine and worries about the risk of conflict spreading to the west, it has been the beneficiary of hopes for peace.

The common currency spiked past its 200-day moving average against the pound on Tuesday and held at a three-month high of 84.82 pence on Wednesday.

The Russian ruble stood at 89 against the dollar after hitting a monthly high of 83.50 in foreign trade on Tuesday.

Russia has promised to reduce the scale of military operations around Kyiv and Ukraine has proposed neutrality in a sign of progress at face-to-face talks in Istanbul.

However, US officials have since poured cold water on hopes of a deal by warning the threat to Kyiv is not over.

“At least the two sides are talking,” said Commonwealth Bank of Australia (OTC:) strategist Joe Capurso.

“The expected good news about the war will benefit the euro more than any other currency in light of Europe’s near conflict and dependence on Russian energy,” he said.

The mood also proved helpful against risk-sensitive currencies like the Australian and New Zealand dollars. They were firmly just below recent peaks in morning trade, with $0.7512 and $0.6946 respectively. [AUD/]

The South Korean won, like the euro that has been battered by soaring oil prices since the war began just over a month ago, gained 1% to 1,208.5 per dollar. [EMRG/FRX]

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Currency bid price at 0405 GMT