Japanese join Swiss in push to devalue currency

 

New York

Japan tamed financial markets and successfully pushed down the value of its currency yesterday, but stalling economic growth in the West and the latest leg of the eurozone crisis suggest that its victory may be shortlived.

Fearful that the rising yen would crimp exports and damage Japan's earthquake-ravaged economy, the Bank of Japan made its third major intervention in currency markets in a year, selling yen and pushing the value of the currency down 4 per cent against the US dollar. The yen had risen 5 per cent against the dollar over the past month.

Part of that early gain had beenreversed within 18 hours, however, and by lunchtime in New York last night the yen was trading at 78.92 to the dollar, down 2.4 per cent. The Japanese currency was also down 1.3 per cent against the euro.

The BoJ's intervention came just a day after Switzerland's central bank also decided to act to curb its rising currency by cutting interest rates. The Swiss franc has become traders' safe haven of choice during the eurozone and US debt crises, while the yen has benefited from the likelihood that interest rates, and therefore investment returns, in the US are likely to remain very low for a long period.

Yesterday's downward pressure on the yen is unlikely to be maintained, said David Rea, Japan economist at Capital Economics. "Intervention is more likely to be effective when it is seeking to reinforce a market trend, not work against it," he warned.

"There are several reasons to be sceptical. Investors' concerns aboutglobal sovereign indebtedness are unlikely to disappear anytime soon. The prop that these have provided to the yen may therefore remain in place for a while yet, despite Japan's own serious fiscal predicament. Second, the deterioration in the global economic outlook has reduced interest rate expectations elsewhere, and raised the possibility of additional quantitative easing in the US. Third, Japan has acted alone without the explicit support of its G7 partners."

Last year, Brazil warned of the dangers of a "currency war" and competitive devaluations by countries that want to support their exporters. The dollar has drifted lower as expectations for the US recovery have faded and concerns about the size of government debt have come to the fore, and talk that the Federal Reserve may introduce new measures to inflate the economy have put further downward pressure on the currency in recent days.

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?