The possibility of a devaluation of the yen receded on Friday (16 November), as forward U.
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Background: The possibility of a devaluation of the yen receded on Friday (16 November), as forward U.S. dollar rates continued to decline on the Tokyo Foreign Exchange Market. The oil shortage was seen as the main threat to Japan, whose economy is heavily dependent on supplies of fuel.
The Central Bank in Japan sold an estimated 140 million dollars (GBP 60 million sterling) at the new intervention point of 280 yen to the dollar. The intervention point was fixed on Tuesday (13 November), through a virtual devaluation by 5 yen. Exchange banks continued to need dollars for import settlement and other purposes. The Governor of the Bank of Japan, Tadashi Sasaki, said it was natural for the yen to decline, in view of Japan's heavy balance of payments deficits since March this year, and with restoration of confidence in the dollar.
On Wednesday (14 November) forward dollar rates declined to around 289 yen from 294 yen, as some bankers and traders apparently believed they had gone too far in pushing up forward dollar rates. Banking sources said the Central Bank was believed to have sold more than 600 million dollars (GBP 260 million sterling) in the last five days. The Finance Ministry eased Japan's rigid foreign exchange controls on Wednesday, in a move to take the heat out of the forward dollar market. It's believed the relaxations were also designed to encourage a bigger inflow of dollars.
The current exchange rate is approximately 656 yen to the pound sterling, and 2.3 U.S. dollars to the pound sterling.