Dollar hits 150 yen then dips on intervention jitters

By Karen Brettell and Amanda Cooper

NEW YORK/LONDON (Reuters) - The dollar touched the closely watched 150 level against the yen on Friday, before falling back again, as investors positioned for the Federal Reserve to hold rates higher for longer.

A move above 150 is seen in the market as having the potential to spur an intervention by Japanese monetary officials concerned about the currency weakening too far.

It reached 150.165 on Oct. 3 before quickly dropping back to 147.3, but market participants say it is not clear whether the move resulted from an intervention by the Ministry of Finance (MOF) or was caused by market nerves and trading stop losses or other automated trades being triggered.

"The market is obviously very mindful that the 150 threshold... is a potential precursor for the uncertainty of having the MOF on the other side of it," said Jeremy Stretch, head of G10 currency strategy at CIBC Capital Markets.

Analysts say that the speed and context of the move and how far it goes above 150 will likely influence whether the Ministry of Finance steps in.

The dollar was last up 0.11% on the day against the Japanese currency at 149.85 yen.

The dollar rally has stalled since the index hit a 10-month high on Oct. 3 even as benchmark 10-year Treasury yields continue to hit fresh 16-year highs.

Adam Button, chief currency analyst at ForexLive, said that the potential for MOF intervention was limiting dollar gains.

“I think the dollar would otherwise be stronger if not for the threat of intervention from Japanese monetary officials,” he said. “Given fixed income and equities, the dollar should be stronger than it is this week, and I think it’s just a matter of time until it materializes.”

Some analysts also note that the number of investors holding dollars has become crowded, which may be holding back further rallies.

"The greenback continues to draw smaller benefits from strong U.S. data and high rate advantage than it should, likely due to its overbought status, but upside risks remain predominant," ING analyst Francesco Pesole said in a note on Friday.

The index was last at 106.14, down 0.06% on the day. The euro rose 0.04% to $1.0593.

The dollar eased on Thursday after Fed Chair Jerome Powell said rising market interest rates could reduce the need for action by the central bank.

The odds of a Fed hike in December have dropped to 24%, from 39% before Powell’s comments, while a November pause is seen as a sure thing, according to the CME Group’s Fed Watch Tool. But the U.S. central bank is not expected to begin cutting rates until June.

Investors are also watching the Middle East for any indications of an escalation in the war between Israel and Hamas.

The Swiss franc hit an almost six-week high against the greenback earlier on Friday, before falling back to last trade at 0.8917. The Swiss currency has been a popular safe haven as a result of rising geopolitical tensions.

The Swissie also hit its highest against the euro since 2015, when the Swiss National Bank scrapped its peg between the two currencies.

Elsewhere, the pound fell to a five-month low against the euro after a series of data releases showed a collapse in British consumer confidence in October following weak retail sales the month before.

Sterling was last up 0.14% against the dollar at $1.2158.

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Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.1400 106.2100 -0.06% 2.561% +106.4200 +106.0600

Euro/Dollar $1.0593 $1.0582 +0.11% -1.13% +$1.0604 +$1.0565

Dollar/Yen 149.8500 149.7900 +0.04% +14.29% +149.9900 +149.6000

Euro/Yen 158.73 158.51 +0.14% +13.14% +158.9200 +158.3500

Dollar/Swiss 0.8917 0.8917 +0.04% -3.53% +0.8935 +0.8902

Sterling/Dollar $1.2158 $1.2139 +0.14% +0.51% +$1.2170 +$1.2094

Dollar/Canadian 1.3701 1.3721 -0.14% +1.12% +1.3734 +1.3670

Aussie/Dollar $0.6315 $0.6329 -0.21% -7.35% +$0.6329 +$0.6298

Euro/Swiss 0.9444 0.9430 +0.15% -4.56% +0.9454 +0.9418

Euro/Sterling 0.8711 0.8714 -0.03% -1.50% +0.8740 +0.8709

NZ $0.5824 $0.5850 -0.43% -8.27% +$0.5850 +$0.5818

Dollar/Dollar

Dollar/Norway 11.0500 11.0090 +0.42% +12.65% +11.0740 +11.0180

Euro/Norway 11.7106 11.6345 +0.65% +11.60% +11.7284 +11.6229

Dollar/Sweden 10.9720 10.9594 +0.31% +5.42% +11.0165 +10.9516

Euro/Sweden 11.6239 11.5883 +0.31% +4.25% +11.6439 +11.5874

(Reporting by Karen Brettell; Additional reporting by Amanda Cooper in London; editing by Barbara Lewis and Jonathan Oatis)