Foreign-exchange traders are gearing up to test Jun Azumi’s resolve to keep intervening in currency markets to weaken the yen from its postwar high.
While Japan’s Finance Minister directed the central bank on Oct. 31 to sell what analysts estimate was about 8 trillion yen ($102 billion), sending it down as much as 4.7 percent against the dollar, the move failed to increase volatility. Traders avoid currencies with rising price swings because they boost the odds of sudden losses.
“The yen remains one of our favorite currencies as Japan still has a strong trade surplus and benefits from the global risk aversion that we’re seeing,” Vimal Gor, the Sydney-based head of income and fixed interest at BT Investment Management Ltd., where he oversees the equivalent of $13 billion, said on Nov. 3. “Unilateral interventions in the Japanese currency have no real lasting impact. If anything we’d view this as a buying opportunity.”
Azumi, who took office in September when predecessor Yoshihiko Noda became prime minister, is under pressure to weaken the yen after traders seeking a haven from turbulence in global financial markets pushed it up as much as 21 percent between April and October against a basket of nine developed- nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes.