Dollar shrugs off suspected Japan intervention; pound eyes UK politics

LONDON, Oct 24 (Reuters) – The dollar rose on Monday, warding off another burst of suspicion of Japanese intervention and sending China’s offshore yuan to record lows, while the pound faltered as Britain’s Conservative Party raced to pick its third. leader this year.

The yen hit an overnight low of 149.70 per dollar before being swept to a high of 145.28 within minutes, in a move that suggested the Bank of Japan, acting for the Ministry of Finance of Japan (MOF ), had intervened for the second day. The yen was last at 149.05, down 0.9% on the day against the dollar.

“As with the previous round of intervention, when the dollar/yen was offered above 145.00, it appears that the half-life of the intervention’s impact is indeed very short,” said John Hardy, head of currency strategy at Saxo Bank. .

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The Yen’s overnight volatility hit its highest level since September 21, the day before the BOJ intervened to support the currency for the first time since 1998.

Japan likely spent a record 5.4 trillion to 5.5 trillion yen ($36.16 billion to $36.83 billion) on its yen purchase intervention last Friday, according to brokerage estimates. of the Tokyo money market.

Traders also suspect that the BOJ intervened more than once in the past month to support a currency that has fallen 22% this year against the dollar.

The Japanese government has pledged to keep borrowing costs extremely low, meaning the BOJ is also intervening in bond markets to keep yields in check.

“Clearly, the market does not see the current structure as sustainable and every day for the past week the BoJ has had to step in with special bond purchases to keep the 10-year government bond at 25 basis points. The 10-year swaps Japan are trading at 65.5 basis points, and that paints a fitting picture,” said Pepperstone strategist Chris Weston.

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The dollar held firm in the face of a report released Friday from the Wall Street Journal that said Federal Reserve officials are likely to debate the size of future interest rate hikes, which in turn has kept U.S. Treasure rise.

The euro tumbled 0.1% at $0.9851 as China’s offshore yuan plunged to a new record low against the dollar of 7.3227.

Chinese Prime Minister Xi Jinping has secured a precedent-breaking third leadership term by choosing a high-level governing body filled with supporters. Xi will likely follow his zero COVID policy and could favor the state over private sector growth, analysts say.

US-listed shares of Chinese companies tumbled in pre-market trading on Monday and Hong Kong shares saw their biggest one-day drop in 14 years.

Sterling rocked on the news that former Prime Minister Boris Johnson withdrew from the Conservative leadership race and stood at $1.1302, up from $1.14.

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Former Chancellor Rishi Sunak has emerged as the clear favorite to become Britain’s next prime minister.

“Pound price action appears to take on the advent of a Sunak/Hunt ticket as PM/Chancellor and a focus on trying to restore some of the UK’s lost fiscal credibility,” said ING strategist Chris Turner.

“Following the failed experiment with Trussonomis, the challenge the new team will face will be tougher than what existed earlier this summer and likely a reason why international investors will not want to chase GBP/USD above the 1.15 level.” , he added.

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Additional reporting by Vidya Ranganathan and Kevin Buckland in Singpoare and Stella Qiu and Wayne Cole in Sydney; Editing by Bernadette Baum, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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