Dollar near 7-month high to yen on policy split; Yuan snubs PBOC

The dollar’s surge of as much as 11.55 percent since late March to reach 144.62 yen on Wednesday for the first time since November 10 has prompted increased verbal warnings from Japanese government officials this week that the move may have been too rapid.

The ministry of finance and BOJ intervened in the currency market last autumn when the dollar strengthened beyond 145 yen.

The U.S. currency was about flat at 144.52 late in the Asian day, but earlier strengthened as far as 144.60.

For intervention, ”the threshold may be higher this time because there’s just less public criticism of yen weakness right now,” due to a backdrop of a rising stock market, lower energy price pressures, and the return of foreign tourists, said Shinichi Kadota, senior FX strategist at Barclays in Tokyo.

”I’m not going to rule anything out, because they always try to surprise” when they intervene, he added. ”But for it to have a sustainable effect, the underlying driver — which is monetary policy — also has to turn … and that monetary policy divergence is unlikely to change anytime soon.”

The U.S. dollar index — which measures the currency against six major peers, including the yen, euro and sterling — gained 0.22 percent to 103.20, extending its 0.46 percent overnight climb.

The euro slid 0.25 percent to $1.08845, following Wednesday’s 0.45 percent slide. Sterling edged down 0.13 percent to $1.2620, extending the previous session’s 0.88 percent tumble.

The dollar added 0.3 percent to 7.2619 yuan in the offshore market, taking it close to the previous day’s 7-1/2-month low of 7.2694.

The PBOC set the midpoint rate at 7.2208, in what analysts at Citi called ”the most forceful sign yet of official discomfort at the pace of yuan depreciation,” although adding they are ”doubtful this will prevent more upside, as it has proven ineffective over time in the past.”

Elsewhere, the Australian dollar largely shrugged off stronger-than-expected retail sales data for May earlier in the day to last trade 0.2 percent higher at $0.66135, regaining some composure following Wednesday’s 1.27 percent tumble.

The Reserve Bank of Australia decides policy next week, and a sharp drop in headline inflation in a report released on Wednesday saw traders paring the odds of another rate increase to just one-in-three currently.