By Rocky Swift and Makiko Yamazaki
TOKYO, Nov 13 (Reuters) - The yen could retest 40-year lows against the dollar if the greenback's broad strength and signs of limited US support for Japan's recent currency intervention undermine the threat of further coordinated action, market players said.
The yen weakened past 160 per dollar overnight for the first time since early September, prompting renewed warnings from Japanese Finance Minister Satsuki Katayama that Tokyo stood ready to act again after record
intervention in July and August.
Japan spent 15.4 trillion yen ($96.5 billion) to bolster its currency after it sank to a four-decade low of 163.99 per dollar in late July. But what gave the operation an extra boost was joint action by the United States, which Treasury Secretary Scott Bessent had hinted at the time could reach $10 billion.
A report on Thursday from the Federal Reserve Bank of New York, however, showed the total was far lower, amounting to about $497 million of euro sales to buy yen. Analysts say the relatively modest contribution weakens the deterrent effect of any future joint action, even as it confirms Washington was willing to back Tokyo at a critical moment.
"There have been several cases of coordinated intervention, but always the US didn't spend so much money," said Tohru Sasaki, chief strategist at Fukuoka Financial Group and a former Bank of Japan official. "People have been worried that coordinated intervention could be very powerful, but this shows that it's not."
TRADERS MORE WILLING TO TEST SUPPORT
The yen's persistent weakness has become a political and economic headache for Prime Minister Sanae Takaichi's administration, lifting the cost of imported fuel and other commodities and squeezing households already struggling with higher prices. It has also added to pressure on the Bank of Japan to continue tightening policy and narrow the interest-rate gap with other major central banks.
Katayama's remarks followed a similar warning on Thursday from top currency diplomat Atsushi Mimura, who said it was "too early to forget" this summer's intervention. They also came as markets increasingly expect the Bank of Japan to raise rates next month, with policymakers sounding more alarmed about inflation and the cost of imports caused by the yen's weakness.
But those domestic pressures have in recent days been swamped by a broader dollar rally. The greenback climbed to a 19-month high against major peers as US Treasury yields rose on increased bets on a bigger Federal Reserve rate hike next month.
"Treasury yields right now are seen as a major reason the yen is being sold," said Bart Wakabayashi, branch manager at State Street in Tokyo. "All these comments coming out of the Fed are all indicating higher rates, and I don't think the BOJ is willing to keep up."
That may leave traders more willing to test higher levels, particularly if they conclude that Tokyo acting alone would have only a limited impact and that Washington is reluctant to do much more than lend verbal support.
The New York Fed's currency action "was small as expected, and shows little seriousness on the part of the US in flipping the yen," said Shuhei Uehara, a foreign exchange analyst at Gaitame.com Research Institute.
Chart signals suggest that if dollar/yen pushes through Thursday's peak of 160.30, the next milestone would be 160.39, its high from early September, and that a break above there could open the way toward 164, Uehara said.
Even so, analysts said the diminished threat of joint intervention was unlikely to give speculators a free pass. The 160 line remains a sensitive threshold for Tokyo, and the risk of official action would likely rise if the currency nears this summer's lows.
"The 160-yen level is a closely watched line," said Akira Moroga, chief market strategist at Aozora Bank. "Going forward, they can still intervene on a large scale if they choose. Even if the US doesn't step in, Japan likely will."
(Reporting by Makiko Yamazaki, Rocky Swift, Noriyuki Hirata, Junko Fujita in Tokyo; Editing by Muralikumar Anantharaman and John Mair)
