The yen held steady through the New York trading session on Monday, after a sharp advance earlier in the day that sparked speculation authorities may have intervened to support the currency again after last week’s coordinated action between the US and Japan.
The Japanese currency ended the New York day around 157 per dollar, roughly where it was when the US trading session started. Earlier in Tokyo, it swung from a small decline to gain as much as 1.4% versus the dollar, before paring much of the move.
“After three days of volatility, the yen showed some signs of stability today,” said Howard Du, a strategist at TD Securities in New York. “We believe some speculators may chase the yen to around 153 in the short-term.”
The yen hasn’t been that strong since February. Before the surge in recent days, it was hovering within a whisker of the weakest levels since 1986, near 164 against the greenback.
Japan and the US Treasury Department are now working together to a degree unseen in decades to shore up the yen, raising the stakes for anyone betting against it. Treasury Secretary Scott Bessent said the US wouldn’t hesitate to step into the market again. President Donald Trump added his stamp of approval to the recent action, describing the intervention as “a signal of friendship.”
Japan confirmed the first joint intervention with the US in currency markets in 15 years, according to a statement by Finance Minister Satsuki Katayama.
When the yen gained abruptly again early on Monday, it sparked fresh talk of further intervention in Asia hours.
“The price action alone looks like intervention,” said Gareth Berry, a strategist at Macquarie Group Ltd. in Singapore. “The Ministry of Finance has a limited window of opportunity to do some damage on the USD/JPY chart, and crack some support levels.”
While many in the market still question the capacity of authorities to change the long-term trajectory of the yen in the $9.5 trillion-per-day currency market, there is no doubt of their power in short bursts. In just two days at the end of last week, they reversed more than two months of losses in the yen, using a combination of direct purchases in the market, calls by officials to banks that deal in the currency and jawboning from Bessent and Katayama.
“It seems likely that authorities would intervene further in coming days if the yen begins to unwind the recent move, as was the case in May of this year,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note. “We continue to think intervention is an effective tool for authorities to buy some time before fundamental factors turn more positive.”
The currency has been under pressure from rising oil prices, Japan’s persistent budget deficits and a yawning interest-rate gap with the US and other major economies. The depreciation has sounded alarm bells in Tokyo, with rising import costs squeezing businesses and consumers.
A failure to arrest the drop would have impact that goes far wider than Japan as turmoil in the nation’s financial markets tends to spill out globally.
“The significance of recent developments may not be the intervention itself, but the message it sends: markets are increasingly coming to believe that excessive yen weakness is no longer viewed as solely Japan’s problem,” said Masayuki Nakajima, senior currency strategist at Mizuho Bank in London. “It appears increasingly likely that concerns in Washington over the risks posed by a sharp depreciation of the yen and rising volatility in the JGB market, particularly the potential spillover effects on the US Treasury market, are part of the backdrop to these developments.”
What Bloomberg strategists say:
“After coordinated intervention in the Japanese currency from authorities in both Japan and the US, the yen is now expensive. Calm returned today, but the currency will weaken again. Fair value, according to my model, is about 167 per dollar, not 157.”
Sebastian Boyd, Macro Strategist, Markets Live. For the full analysis, click here.
Volatility in Japanese government bonds jolted Treasuries and drew the ire of Bessent earlier this year. Meanwhile, the more the yen’s depreciation gives Japan an advantage in trade with the US, the more it is likely to irk Trump.
Asked on Air Force One what it is that the US is getting out of helping Japan, Trump said: “Financial benefit. We also, it’s also good for the world economy.”
Bessent’s commitment to shoring up the yen was clearly shown when Reuters published a photograph of a notepad in front of him at a cabinet meeting in Camp David on Friday. Under a “To Do” title, it was written “Buy Japanese Yen $5-10 bil.” He had earlier generated headlines by saying in a Fox Business interview on Thursday that the yen is “very undervalued” and “excess volatility” isn’t healthy.
The intervention on Thursday and Friday came as the Bank of Japan board gathered to set monetary policy. It voted 8-1 to keep interest rates unchanged, having raised them to 1% in June. While that’s the highest level since 1995, it is well below the 3.75% upper bound for the US policy rate.
At a post-decision briefing, Governor Kazuo Ueda offered little fresh support for the currency. He opened the door to the possibility of rate hikes at upcoming meetings without signaling this was likely.
The Finance Ministry’s top currency bureaucrat, Atsushi Mimura, said on Monday that he will respond to foreign exchange in coordination with monetary policy.
“The comments imply that the BOJ should continue normalizing monetary policy to back up support for the yen from intervention,” said Lee Hardman, senior FX strategist at MUFG in London. Coupled with a “noticeably more hawkish” policy stance from Ueda last week, the BOJ may hike rates at its next meeting in September, sooner than market expectations for the end of the year, he added.
The yen recorded an intraday jump of more than 3% versus the greenback on Thursday, when Japan spent around ¥8.45 trillion buying the currency, according to data compiled by Bloomberg and based on a comparison of BOJ accounts and money brokers’ forecasts. That would likely be the biggest-ever intervention on a single day by Tokyo.
“The fact that the US and Japan coordinated the intervention, and that the US took the unusual step of selling euro, indicates that there is a concerted effort to shift currency trends,” said Neil Newman, head of strategy at Astris Advisory Japan. “We should therefore expect further intervention if necessary.”
With assistance from Anya Andrianova, Sam Kim, Alice French, Matthew Burgess, Momoka Yokoyama, Naomi Tajitsu, Aline Oyamada, Kana Nishizawa, Cormac Mullen, Takashi Umekawa, Kanoko Matsuyama, Erica Yokoyama and Christopher Anstey.
This article was generated from an automated news agency feed without modifications to text.
