(Bloomberg) — Supporting the yen will take more than government intervention and will need hawkish signals from the Bank of Japan, said Rick Rieder, chief investment officer for global fixed income at BlackRock Inc.
Japan’s currency has edged back toward 160 per dollar this week, once again approaching its cheapest level in four decades. The move unwinds some of the US-Japanese efforts to strengthen it at the turn of the month and underscores the limits of intervention in the face of interest-rate differentials that favor the dollar.
Foreign-exchange intervention is “not the most durable” path to a yen rebound, Rieder said Wednesday in an interview for Bloomberg Television’s Wall Street Week with David Westin.
“I’ve watched intervention happen over time — you need to really keep going with a lot of fire power,” Rieder said. “You’ve got to get monetary policy to a place that people believe that you’re going to raise the rate — you’re going to be hawkish when you need to be. And I think out of Japan, we need to see that.”
Japan’s benchmark rate, at 1%, compares with the Federal Reserve’s target range of 3.5% to 3.75%.
Japanese Prime Minister Sanae Takaichi’s government is supportive of a near-term hike by the nation’s central bank, with the next move likely either in September or October, according to people familiar with the matter. Meanwhile, traders see a Fed rate increase as likely by year-end, swaps markets indicate.
The Bank of Japan last lifted borrowing costs by a quarter-point to 1% in June. Rieder said he sees another increase in September, though the central bank might delay the decision to December.
“That’ll be important for the markets to stabilize,” he said.
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