Yen on track for strongest week since late 2008, Japan steps up rhetoric

Fri Feb 12, 2016 3:54am EST
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By Anirban Nag

LONDON (Reuters) - The yen was firm on Friday, on track for its biggest weekly rise against the dollar since late 2008, as deepening worries about global growth and whether policymakers have enough ammunition to respond to it underpinned flows into safe-haven currencies.

Japanese officials stepped up their attempts to talk the yen down, with Finance Minister Taro Aso hoping that the G20 finance leaders gathering in Shanghai later this month will consider a global policy response to the recent market turmoil.

Major central banks including the European Central Bank, the Bank of Japan and the Swiss National Bank have all adopted negative rates to boost inflation. But these are weighing on banks' earnings and dragging down stocks globally, threatening business confidence and growth prospects.

The dollar was struggling at 112.35 yen JPY=, despite the increased Japanese rhetoric.

The greenback had fallen to 110.985 yen on Thursday, its lowest level since October 2014, and was on track to shed 3.8 percent for the week, its worst since Oct. 2008.

The dollar had jumped to 113 yen level in thin conditions in Europe on Thursday, leading to speculation that Japanese authorities were checking currency rates, a step that often precedes intervention.

A government official declined to comment on intervention on Friday.

"The introduction of negative interest rates has certainly not weakened the currency," said Lutz Karpowitz, currency strategist at Commerzbank. "Of course, that is not at all what the Bank of Japan had hoped to achieve. The Japanese officials really need a weak yen unless they want their own inflation projections to become a laughing stock."   Continued...

Chinese 100 yuan banknotes and a U.S. one dollar banknote are seen in this picture illustration in Beijing, China, January 21, 2016. REUTERS/Jason Lee