Tradervox.com (Dublin) – After the Bank of Japan intervened in the currency market as the yen strengthened against the dollar to post WWII record of 75.35, the currency weakened to 84.18 yen per dollar, which is an 11-month low. However, the yen has strengthened again reaching 77.91 yen this month. The failure of the Bank of Japan to announce any measures to weaken the currency has forced the market to change its forecast on the yen. In a recent survey, the market expects the yen to strengthen to 79 yen per dollar by the end of this year, which is stronger than the 85 level predicted in April.
The Japanese currency declined by 1.6 percent last week to 79.66, and has taken a 79.54 average for the year. The market predicts that BOJ will intervene if the currency continues to advance against the dollar. This has come as intervention measures taken in March are seen to have failed to maintain the yen at above 80 yen per dollar. The banks efforts have been hindered by the popularity of the government’s bonds. Companies that have been hard hit by the strong currency include the Sony Corp, Sharp Corp and Panasonic Corp which have resulted to cutting employees and earnings. Japan’s Finance Minister Jun Azumi has called on the central bank to take more action to curb the currency gains.
According to Fredric Neumann, of HSBC Holdings Plc in Hong Kong, the Bank of Japan did not provide enough easing hence the yen did to weaken as expected. Fredric added that the bank’s decision not to intervene in its recent meeting is indicative of its timid approach to the strengthening yen. Masafumi Yamamoto has indicated that despite the simmering speculation of BOJ intervention, the yen will continue to strengthen against the yen. Yamamoto has worked at BOJ for ten years and is currently the Chief Currency Strategist at Barclays Plc in Tokyo.