The yen firmed against the dollar and euro in Asian trade on Friday but remained well below the highs attained before Japan intervened in markets this week to stem the unit’s strength.
The yen traded at 85.60 to the dollar in Tokyo morning trade, strengthening from 85.90 in New York but still sharply below the 15-year high of 82.86 hit Wednesday in Tokyo before Japan stepped into forex markets.
The euro stood at 1.3069 dollars from 1.3078 in New York and 112.03 yen from 112.15.
Japan’s Finance Minister Yoshihiko Noda said on Friday the government will intervene again in the foreign exchange market to weaken the yen if necessary.
“I will continue to monitor market developments while maintaining a sense of gravity,” Noda told a press conference, while placing further pressure on the Bank of Japan to “continue significant monetary easing.”
The central bank indicated it would leave the extra supply of yen — reportedly around two trillion yen — sloshing around the money market to bolster lending and weaken the currency instead of adopting mopping-up policies usually deployed to prevent inflation.
Japan is looking to end years of damaging deflation.
“This can be viewed as another form of quantitative easing,” Morgan Stanley analysts said.
Dealers said the dollar could again soon fall below 85 yen as Japan’s moves will invite speculators to build up long positions at better levels with players generally bearish on the dollar.
Morgan Stanley noted that it was not certain whether Japanese authorities would be as aggressive this time around as a 2003-2004 intervention program, which totaled 35 trillion yen.
The yuan ended its six-day rally against the US dollar Friday after the completion of the closely watched US Congressional hearings on Beijing’s exchange rate policy.
The dollar was quoted at 6.7301 yuan, up from 6.7248 at Thursday’s close.
The yuan’s decline came after the People’s Bank of China set the dollar-yuan central parity at 6.7172, just lower than 6.7181 Thursday.
“The central parity was certainly higher than expected and so demand for the dollar has again dominated trading this morning,” a Shanghai-based trader at an Asian bank told Dow Jones Newswires.
Against hostile congressional questioning, US Treasury Secretary Timothy Geithner pressed China to boost the value of its currency but also tried to fend off lawmakers who want the administration to take harsher action.