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The yen soared by the most in more than two years against the US dollar, with Japan’s Nikkei newspaper reporting that officials stepped in once again to try and prop up the nation’s sagging currency.
The currency sharply advanced as much as 3.3% versus the dollar in New York trading on Thursday, the most on an intraday basis since December 2023, when Bank of Japan Governor Kazuo Ueda indicated that the central bank was prepared to exit what was then the world’s last negative interest-rate regime. The yen closed at 159.53.
“The scale of the move strongly suggests intervention,” said Geoffrey Yu, a senior strategist at BNY. “Efficacy remains in question, though.”
Nikkei, citing market participants, reported that the Japanese government and Bank of Japan intervened in the foreign-exchange market and that US authorities also requested quotes on the dollar-yen rate.
Japanese Finance Ministry officials in Tokyo couldn’t immediately be reached for comment. Representatives for the US Treasury didn’t respond to a request for comment. In an interview with Bloomberg earlier this month, Japan’s top currency official, Atsushi Mimura, refrained from spelling out the finance ministry’s standard currency stance, including its readiness at any time to take “bold action” — implying intervention.
The yen, which has weakened to a four-decade low in recent months, has been under relentless pressure from rising oil prices, persistent budget deficits and a yawning interest-rate gap. The currency has slumped despite the fact that Japanese authorities spent a record ¥11.73 trillion buying the currency in the open market last quarter. Japan likely drew on its holdings of foreign securities, including US Treasuries, to finance that intervention, according to finance ministry reserve data.
The unprecedented amount spent by Japan underscores not only how much is at stake for the world’s fourth-largest economy, but also the difficulty in pushing back against the tide in the $9.5 trillion-a-day global foreign exchange market.
After a quarter century without intervening, Japan stepped back into the market to support the yen in 2022, and then again in 2024, as authorities tried to slow the yen’s depreciation against the dollar. The yen’s slide began as central banks around the world ratcheted up interest rates in the face of accelerating inflation post-Covid, while the BOJ kept its own policy rate negative at the time to spur growth in the Japanese economy.
The latest moves in the yen come just ahead of the BOJ’s next policy decision on Friday, in which policymakers are expected to hold rates after last month’s hike. That increase lifted the benchmark interest rate to the highest level since 1995 as investors cited concern that it was behind the curve in addressing inflation.
“Previous interventions have been followed by BOJ hikes, most recently in mid-2024,” said Rory Green, an economist at TS Lombard. “A move tomorrow would still be a surprise, but the meeting is now live.”
What Bloomberg Strategists Say…
“Traders hedged for yen strength this week are being vindicated by the recent moves as intervention speculation heats up again. With the Fed failing to deliver on a surprise hike and the BOJ meeting ahead of us, these bets now seems particularly well placed.”
-Tatiana Darie, Markets Live Strategist. For the full analysis, click here.
Ahead of the BOJ decision, Citigroup strategists led by Daniel Tobon urged investors to position in the options market for the yen to slide against the dollar, explaining in a note to clients that Ueda is unlikely to send a more hawkish signal than the market expects.
While the Federal Reserve left its own rates steady this week, traders still expect US borrowing costs to rise later this year — keeping the interest-rate gap between the US and Japanese economies unfavorably wide for the yen.
The Fed’s decision on Wednesday, however, sent the US dollar sliding as traders were forced to recalibrate some of their expectations for the timing of a hike. That would make the timing favorable for Japanese authorities to intervene, said Win Thin, chief economist at Bank of Nassau 1982.
The Bloomberg Dollar Spot Index had been edging lower in early New York trading, but it extended its losses to more than 0.9% after the yen’s sudden surge. The yen, meanwhile, held on to the bulk of its gains throughout the session, with another smaller jump in afternoon trading that left it within the day’s range.
“Intervening now could make investors think twice about selling the yen,” said Takeru Yamamoto, a trader at Sumitomo Mitsui Trust Bank in New York.
With assistance from Anya Andrianova, Naomi Tajitsu, Erica Yokoyama and Akira Matsui.
This article was generated from an automated news agency feed without modifications to text.
