The US dollar fell sharply against the yen in late Japan trading yesterday after comments from a top Japanese official stirred bubbling market fears of central bank intervention.
Eisuke Sakakibara, director-general of the finance ministry's International Finance Bureau, pulled the rug out from under the dollar when he said the past year's movements raised the chance the Japanese currency could strengthen, possibly to 103 yen per dollar.
The dollar lost nearly two yen as trading drew to a close in Japan and European desks were opening for business, falling below as low as 123.42 yen. The yen later stabilised near 123.85 against the dollar in early US trading.
Mr Sakakibara, known as 'Mr Yen' for his legendary influence on currency markets, issued the warning in connection with the recent boom in popularity of high-yielding, dollar-denominated securities among individual investors in Japan.
His comments, designed to remind Japanese investors of the dangers of foreign exchange risk, were based on the past year's yen volatility against the dollar.
Even before he spoke, analysts said there was a nervous edge in the market and that something was brewing on the intervention front.
Some analysts saw his comments as testing the water ahead of intervening in the market.
