LONDON (Reuters) - The yen was on track on Friday for its biggest weekly gain against the dollar since late 2008 as worries about global growth supported inflows to safe-haven assets, although the currency’s recent surge stalled in London trade.
Japanese officials stepped up their attempts to talk the yen down, with Finance Minister Taro Aso hoping that the G20 finance leaders gathering in Shanghai this month will consider a global policy response to the recent market turmoil.
Major central banks including the European Central Bank, the Bank of Japan and the Swiss National Bank have all adopted negative rates to boost inflation. But these are weighing on banks’ earnings and dragging down stocks globally, threatening business confidence and growth prospects.
The dollar was up 0.15 percent at 112.55 yen, having fallen to 110.985 yen on Thursday, its lowest level since October 2014. It was on track to shed 3.7 percent for the week, its worst since October 2008.
The dollar had jumped to 113 yen in thin trading in Europe on Thursday, leading to speculation that Japanese authorities were checking currency rates, a step that often precedes intervention.
A government official declined to comment on intervention on Friday.
“The introduction of negative interest rates has certainly not weakened the currency,” Commerzbank currency strategist, Lutz Karpowitz, said. “Of course, that is not at all what the Bank of Japan had hoped to achieve. The Japanese officials really need a weak yen unless they want their own inflation projections to become a laughing stock.”
The yen’s ascent followed the Bank of Japan’s move to adopt negative interest rates on Jan. 29, under which banks have to pay interest on certain deposits held at the BOJ. The dollar hit a high of 121.70 yen, before sliding stocks, slowing Chinese growth and falling crude oil prices sent investors into perceived safe-haven currencies.
Some traders said the dollar could to drop to 110 yen, a level not seen since late 2014, if risk appetite falls further. Barclays cut its dollar/yen forecasts, saying the greenback will fall to 95 yen by the end of the year - more than 20 percent lower than the 120 yen previously forecast.
One-month dollar/yen implied volatility, an indicator of how much currency movement is expected in the weeks ahead, surged to 15.9 percent on Friday, its highest since June 2013, up more than seven points from levels seen this month.
The euro fell 0.4 percent to $1.1280, not far Thursday’s high of $1.1377, its highest since October 2015.
Editing by Louise Ireland