Japanese yen whipsawed on further suspected intervention By Reuters

By Tetsushi Kajimoto and Yoshifumi Takemoto

TOKYO (Reuters) – The Japanese yen was whipsawed in early Monday trading on suspected intervention by Tokyo for the second straight day, but the efforts to slow the currency’s relentless slide was blunted by a dollar riding a wave of yield-driven and safe-haven demand.

The yen’s sell-off has fed broader concerns for the world’s third-largest economy, as it is driving already surging import bills for everything from fuel to food, and challenges the Bank of Japan’s fierce commitment to ultra-low rates in the face of rapid global monetary tightening to combat rampant inflation.

Japanese authorities again declined to confirm whether they had intervened, but the price action strongly suggested they had.

Early on Monday, the Japanese currency made a thumping 4 yen jump to 145.28 per dollar, indicating currency authorities had stepped in for a second successive day, after a similar move by Tokyo on Friday.

The yen, however, dropped back to near 148, highlighting the widening interest rate differentials between the United States and Japan, as the Federal Reserve extends its policy tightening campaign in contrast to the BOJ’s commitment to keep rates ultra-low.

It was last changing hands at 148.9 on the dollar in midday trading in Tokyo, away from a 32-year-low near 152 seen on Friday.

BOJ’s BIND

The BOJ is facing a dilemma.

With inflation relatively modest, and the economy unable to move into a faster gear, the central bank is wary of raising interest rates at a time of rising living costs and triggering a recession.

The central bank will hold a policy-setting meeting on October 27-28, when it is expected to maintain its dovish policy stance.

The Fed, which meets the following week, is widely set to extend its aggressive streak of rate increases – further bolstering the market’s propensity to load up on dollars and sell the yen.

The Japanese currency is down more than 20% against the dollar this year.

“We won’t comment,” Masato Kanda, vice finance minister for international affairs, told reporters at the Ministry of Finance (MOF), when asked if they intervened again on Monday.

“We are monitoring the market 24/7 while taking appropriate responses. We’ll continue to do so from now on as well.”

STEALTH INTERVENTION

On Saturday, sources told Reuters the dollar’s plunge by as much as by 7 yen overnight on Friday was caused by authorities’ yen-buying action.

On Sept. 22 Tokyo confirmed that it stepped into the market, spending 2.8 trillion yen ($18.80 billion) to prop up the yen for the first time since 1998. However, since then authorities have remained silent on whether they had made any further attempts to support the currency.

At $1.33…