The NZD/JPY currency pair hovered above a 1-week low of 93.59 on Friday due to renewed strength in the Japanese Yen amid elevated concerns that authorities could step in to support the currency.
Japan’s Finance Minister Satsuki Katayama said that policy makers remained fully ready to take “appropriate action” in the foreign exchange market if conditions require it.
Signs of potential official activity in currency markets have intensified as market observers focus on a notable decline in Japan’s financial buffers.
Japan’s foreign reserves fell by USD 77.11 billion in May, ending the month at USD 1.31 trillion compared with USD 1.38 trillion previously, reaching their lowest level since July last year.
Within the reserves, foreign currency holdings decreased to USD 1.09 trillion, including USD 931.68 billion in securities and USD 162.24 billion in deposits.
Alongside Katayama’s comments, Prime Minister Sanae Takaichi acknowledged that Yen weakness comes with both benefits and drawbacks. Takaichi indicated that the government’s economic strategy was aimed at strengthening domestic economic capacity rather than steering the exchange rate.
In the meantime, the New Zealand Dollar has drawn support from the RBNZ’s recent policy messaging, limiting downside for the NZD/JPY pair.
Reserve Bank of New Zealand Governor Anna Breman indicated last week that the official cash rate was likely to rise sooner and by a larger amount than previously signaled.
She pointed to inflation pressures linked to the Middle East conflict, softer growth and rising input costs in New Zealand and across its trading partners.
In response, markets have adjusted their expectations for the New Zealand policy path. Pricing now reflects the view that the central bank will deliver multiple rate hikes through early 2027.
The NZD/JPY currency pair was last down 0.01% on the day to trade at 93.79.
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