(Bloomberg) -- The yen erased its sharp rebound from Friday as concern over Japan’s low interest rates outweighed any bullishness stoked by suspected official intervention and weaker-than-expected US data.

The currency slid as much as 0.6% Monday, and as of morning trading in New York had wiped out its advance from the last session, trading at about 153.80 per dollar. On Friday, the yen strengthened to touch a level last seen several weeks ago, as surprisingly soft US jobs data triggered a selloff in the dollar and prompted traders to bring forward rate-cut bets for the Federal Reserve. 

The combination of the Fed keeping rates higher for longer, the Bank of Japan holding rates lower for longer, and worries about what higher Japanese rates mean for fiscal sustainability is fueling yen depreciation, Torsten Slok and Rajvi Shah at Apollo Global Management wrote in a research note Monday.

“Bank of Japan raising interest rates is difficult with very high government debt levels in Japan,” they wrote. “Bank of Japan lower for longer is putting downward pressure on the yen.”

The volatility in the yen in the past week underscores the challenge Japanese officials face as they try balance the need to raise rates only gradually but also avoid uncontrollable depreciation. Before two rounds of suspected intervention since late April, the currency slid beyond 160 per dollar for the first time since 1990. 

Dollar-yen is likely to move higher and re-test the 160 level given the “tremendously wide” US-Japan rate differentials, Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore, said on Bloomberg TV on Monday. “The impact of the interventions will dissipate quite quickly if indeed US interest rates do not continue to drop from here.”

To stem yen losses, the Ministry of Finance has probably bought the currency twice in late April and early May, spending about ¥9 trillion ($58.9 billion) in total, according to Bloomberg calculations. The yen remains the worst-performing major currency this year with a loss of more than 8% against the dollar.

Japan’s top currency official, Masato Kanda has declined to comment on whether the authorities had intervened.

“Intervention, without additional policy signals, usually won’t last more than 24 hours, beyond creating a general wariness at levels that they have intervened at before,” said Deutsche Bank strategist Alan Ruskin. “The immediate price effect wears off, but there is also some more lasting imprint on market psychology that influences price action.”

Former US Treasury Secretary Lawrence Summers is in the camp that argues intervention won’t have a long-lasting impact. He said such operations are ineffective at shifting exchange rates, even at the large magnitude that Japan has been thought to have deployed recently. 

US Treasury Secretary Janet Yellen over the weekend declined to comment on whether Japanese authorities intervened to support the currency. However, she said the US would expect interventions to be rare and consultations to take place.

“When looking at previous periods of Japan’s intervention, it is more successful when the US participates,” Paul Mackel, global head of FX research at HSBC Holdings Ltd., wrote in a note to clients. However, Yellen’s comments don’t sound like a ringing endorsement, he said.

--With assistance from Ruth Carson, Anya Andrianova and Mark Tannenbaum.

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