Japan sold the Yen for the second time in less than three months after it hit another record high against the dollar Monday, saying it intervened to counter excessive speculation that was hurting the world's No. 3 economy.
The intervention vaulted the dollar more than 4% higher, which would mark its biggest one-day gain in three years, and Finance Minister Jun Azumi said Tokyo would continue to step into the market until it was satisfied with the results.
Indeed, his deputy later said the intervention was not over yet, when asked to assess its effects as the dollar began slipping from the day's high. I don't think intervention has ceased yet, Fumihiko Igarashi told reporters.
Many market players voiced doubts the impact would last given that previous intervention since September 2010 had failed to prevent the Yen from resuming its rally and setting a series of all-time highs against the dollar.
Tokyo's latest foray followed repeated warnings that its patience with the Yen's strength was wearing thin, and came just days before the Group of 20 leaders' summit in Cannes, France.
The summit will focus on Europe's efforts to contain its sovereign debt crisis and avoid a repeat of the financial shock that roiled markets after the Lehman Brothers collapse in 2008.
But Tokyo is keen to win G20 understanding that a strong Yen is one challenge too many for an economy grappling with a nuclear crisis, a 250 billion dollars rebuilding effort from a March earthquake and tsunami and ballooning public debt.
Japan also says investors buy the Yen as a safe haven from the Euro zone debt crisis and stuttering US growth. It argues such demand has nothing to do with the fragile health of the Japanese economy.
We started currency intervention this morning in order to take every measure against speculative and disorderly moves and to prevent risks to the Japanese economy from materializing, Prime Minister Yoshihiko Noda told parliament.
The intervention came after the dollar touched a record low of 75.31 Yen and pushed the world's main reserve currency up past 79 Yen. The dollar, however, slipped below 78 in European trade.