The yen rose on Tuesday after Japanese ministers played down talk of foreign bond buying by the country’s central bank, a day after Prime Minister Shinzo Abe said such a policy could be one option for monetary easing.
Finance Minister Taro Aso told a news conference that he was not considering foreign bond purchases as a part of monetary easing, while Economy Minister Akira Amari said Abe’s comments on Monday simply referred to policy options countries have in general.
Their comments sent down the dollar to 93.61 yen, 0.4 percent below its late European session levels. U.S. financial markets were closed on Monday for the President’s Day holiday.
“The dollar/yen may have entered a period of consolidation after a long rally. Japanese ministers appeared to be toning it down these days. Before they said excessive strength in the yen is being corrected. Now they don’t say anything,” said Katsunori Kitakura, associate director of market-making at Sumitomo Mitsui Trust Bank.
Abe declined to comment on currencies on Tuesday while Aso has not made any direct comments on the yen after the weekend meeting of G20 policymakers in Moscow.
While yen sentiment is weak, the dollar has hesitated so far to re-test a 33-month high of 94.47 yen set last week, with option players selling by to hedge their barrier option positions at 94.50 yen.
“The fact that the dollar/yen couldn’t break above last week’s high yesterday points to the strength of the resistance,” said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
Since mid-November, the dollar has risen almost 20 percent on expectations the Bank of Japan will take aggressive monetary easing steps to shore up the economy.
Some strategists said the yen’s fall could lose momentum for now as investors became wary of betting on further yen weakness until there is more clarity on the next Bank of Japan governor.
Economy Minister Amari said on Tuesday the government will decide on Bank of Japan’s new governor and two deputy governors after Prime Minister Abe returns from a trip to the United States on February 21-24.
Sources told Reuters that former top financial bureaucrat Toshiro Muto is the leading candidate to become Japan’s next central bank governor, replacing Masaaki Shirakawa.