Yen makes dash across ¥153, raising possibility that trend has turned

The yen continued to rally Tuesday morning in Tokyo, moving quickly into ¥153 territory in early Asian trading and staying there.

Some analysts are downplaying the possibility that recent moves are the result of intervention, arguing that the currency is not appreciating fast enough to suggest official buying.

They say that the strengthening, which began on Sept. 2, is probably due to a sense that Japan might act with more resolve to stop the yen from weakening after pressure from the United States to do something.

As of about 10 a.m. Tuesday, the yen was trading at ¥153.6 to the dollar. Japan’s currency hasn’t been this strong since Feb. 18.

Monday was a holiday in the United States, with exchanges, the bond market and banks closed for Labor Day.

Investors and traders are anticipating that the Bank of Japan will be shifting to a more hawkish posture.

Data from Totan ICAP show the market pricing in a 99% chance of a rate increase by the BOJ next week, and expectations are growing that the central bank will raise rates twice by the end of the year.

Now that the currency has moved through ¥155, some analysts are starting to contemplate the possibility that the trend has been broken, that the yen’s weakening has been stopped and that the currency will stay relatively strong.

Up until a few weeks ago, the fate of the yen appeared grim, as a coordinated intervention by United States and Japan was widely seen as ineffective. The yen quickly surrendered much of the gain from the massive yen-buying operation.

In late July, the currency traded at nearly ¥164 to the dollar — levels not seen in 40 years — before Japan and the United States propped it up and took the yen to about ¥155 to the dollar.

The currency quickly retraced to about ¥160 to the dollar before the recent rally began at the beginning of September.