The yen suddenly jumped against the dollar on Monday, signaling traders’ acknowledgment of Japanese authorities intervening to buy yen to support the currency, which has been hovering near its lowest levels in 34 years. The dollar sharply declined to 154.50 yen from 160.245 yen earlier in the day. Trading sources stated that Japanese banks were observed selling the dollar in exchange for yen.
Traders were on alert for any signs of action from Tokyo to bolster the currency, which has depreciated by 11% against the dollar so far this year, as historic attempts to lift the currency through negative interest rates have failed. The Japanese Ministry of Finance was unavailable for comment as Japan was closed for a holiday on Monday.
Bank of Japan Governor Kazuo Oyeda stated in a press conference after last week’s meeting that monetary policy does not directly target currency rates, although exchange rate fluctuations can have significant economic impacts. Japan intervened in the currency market twice in 2022, first in September and again in October, selling the dollar to buy yen as the yen fell to its lowest level in 32 years at 152 yen per dollar.
The yen faced pressure with the rise in US interest rates while Japanese interest rates remained close to zero, leading to capital outflows from yen to dollar. Earlier this month, the United States, Japan, and South Korea agreed to “closely consult” on currency markets in a rare warning, and Tokyo escalated its rhetoric against excessive yen movements.
