The U.S. dollar briefly hit a two-month high close to the 160 yen line Monday in Tokyo, as stronger-than-expected U.S. economic data reduced expectations that the Federal Reserve will cut interest rates soon.
However, market participants refrained from chasing the dollar above the threshold due to caution over a potential yen-buying operation by Japanese authorities. They conducted an apparent intervention on April 29 after the U.S. currency climbed to as high as 160.24 yen.
At 3 p.m., the dollar fetched 159.70-73 yen compared with 159.81-91 yen in New York and 158.76-79 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.0696-0700 and 170.82-91 yen against $1.0689-0699 and 170.84-94 yen in New York and $1.0678-0680 and 169.54-58 yen in Tokyo late Friday afternoon.
The dollar has recently been sought on expectations that the interest rate differential between Japan and the United States will remain wide, as U.S. interest rates are projected to stay elevated for longer than anticipated on the back of a solid economy, dealers said.
In response to the yen's latest slide, Japan's top currency diplomat, Masato Kanda, warned Monday that the government is ready to take appropriate steps against excessive volatility in the foreign exchange market at "any time."
While his remarks, seen by market participants as "usual and expected," had limited impact on the currency market, they believe that authorities could step in when the dollar enters the 160 yen threshold, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.
The yen's recent weakness also came as the United States put Japan back on its currency manipulator watch list last week after Japanese authorities conducted yen-buying interventions to support the currency in April and May without daily breakdowns.
While wariness over another potential intervention remained, Japan's return to the list has raised speculation that it may be more difficult for authorities to step into the currency market, dealers said.
Tokyo stocks ended higher as a wide range of export-oriented issues were boosted by the yen's depreciation, with the Nikkei overcoming earlier losses on weak tech issues, which had tracked declines in their U.S. counterparts late last week.
The 225-issue Nikkei Stock Average ended up 208.18 points, or 0.54 percent, from Friday at 38,804.65. The broader Topix index finished 15.50 points, or 0.57 percent, higher at 2,740.19.
On the top-tier Prime Market, gainers were led by transportation equipment, pharmaceutical, and bank issues.
