The uptrend in the dollar’s value continued unabated April 28 in Tokyo, with an intervention threat by finance officials from the Group of Seven industrialized nations going largely unheeded.
The dollar climbed past the 127 yen mark briefly for the first time in more than two weeks before settling at 126.92-94 yen at 3 p.m., up from late quotes April 25 of 125.84-87 yen.
In early trading in London April 28, the U.S. currency was changing hands at 126.73 yen, up from 125.85 late April 25. It was higher against other major currencies in Europe. Commercial bank officials in Tokyo believe the market remains unconvinced of the intervention threat and is trying to test the G-7 resolve to stem the dollar’s rise.
G-7 officials wound up a one-day meeting April 27 in Washington with a joint statement, saying they shared the view that excess volatility in exchange rates and deviations from economic fundamentals are not desirable. The lack of specific measures in their statement set off a wave of pent-up dollar buying, according to Akira Narumi, a Sakura Bank official.
Narumi cited the wide gap in interest rates between Japan and the United States as the largest factor behind the dollar’s strong showing. While few people expect the Bank of Japan to tighten its grip on credit anytime soon, the market has begun discounting a further U.S. interest rate hike that was expected to be decided at the U.S. Federal Open Market Committee meeting May 20, Narumi said.
Kenji Hayashi, deputy general manager of WestLB Securities Pacific Ltd., agreed. Although the market will continue fretting about central bank intervention, there appears little likelihood that the dollar will give up much of its recent gains, he said.