Yen strengthens after BOJ minutes, markets gauge intervention odds

By Chuck Mikolajczak

NEW YORK, Dec 29 (Reuters) - The yen strengthened on Monday in light holiday trading, on track for its fifth gain in six sessions as markets weighed the timing of additional interest rate hikes in Japan and the chances of intervention.?

Bank of Japan policymakers debated the need to continue raising rates, the minutes from its policy meeting earlier in December, ?when the central bank hiked its policy rate to a 30-year high of 0.75% from 0.5%, showed on Monday.

Finance Minister Satsuki Katayama said last ?week that Japan has a free hand in dealing with excessive moves in the yen, and similar ?statements from officials have helped stem the softening in the Japanese currency against ?the dollar in recent days.?

"The ?conditions for intervention don't exist right now and those conditions would be dramatic price action or high volatility... since they hiked rates, it ?has chopped around a bit, but I don't think ?the threshold's there," said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.?

"The market is focused on next year, people who are trading today and tomorrow ?are sort of last minute kind of things, they ?tend to be ?small orders and people who have to do them, so I won't take much of a signal from this, we've been consolidating for a few days."

The dollar index, which measures the ?greenback against a basket of currencies, rose 0.09% to 98.12, with the euro down 0.12% at $1.1757. Sterling weakened 0.04% to $1.3489.

Against the Japanese yen, the dollar weakened 0.23% to 156.18.

In a note on Monday, Torsten Slok, chief economist at Apollo Global Management in New York, said the yen has traded much weaker than interest rate differentials alone would suggest over the past six months, "indicating that growing concerns about Japan's fiscal position in ?a rising ?rate environment are starting to dominate."

Despite the rate hike at the BOJ's December 19 meeting, the yen weakened to a one-month low of 157.77 per dollar, prompting intervention warnings. Japan last stepped ?into markets to defend its currency in July 2024, buying yen after the currency hit a 38-year low of 161.96.

The economic calendar is thin in most markets ahead of the New Year holiday, although U.S. data showed pending home sales rose 3.3% last month after an upwardly revised 2.4% gain in October, the National Association of Realtors said. The index tracking sales rose to its highest level since February 2023.

Tuesday will bring about the release of minutes from the Federal ?Open Market Committee's meeting earlier this month in which the U.S. central bank cut rates? and projected just one more reduction for next year, although markets have priced in roughly two more.

In cryptocurrencies, bitcoin fell 0.13% to $87,432.89.

(Reporting by Chuck Mikolajczak; additional reporting by Rocky ?Swift in Tokyo and Alun John in London; Editing by, Kate Mayberry, William Maclean, Chizu Nomiyama and David Gregorio)