The yen shot higher by 3.3% against the dollar in one trading session, touching 157.98 yen per dollar at its strongest point. That is the biggest intraday gain for the currency since December 2023. For context, the global foreign exchange market trades roughly $9.5 trillion every day, so a move this large in a currency as big as the yen stands out.
Traders immediately suspected that Japanese officials had stepped in to buy yen and sell dollars. Geoffrey Yu, a senior strategist at Bank of New York, remarked, "The scale of the move strongly suggests intervention." He added that whether it actually works is another question.
This is not the first time Japan has played defense.
The yen has been under pressure from several angles at once. Rising oil prices push up Japan's import costs. Large government budget deficits weigh on confidence. And the biggest factor - a wide gap between interest rates in the US and Japan - has encouraged investors to sell yen and buy dollars to earn higher returns.
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Even after hiking rates, Japan's benchmark interest rate sits at a level not seen since 1995. That is still far below US rates, which makes the yen a tough sell for yield-seeking investors.
Japanese officials have not confirmed this week's intervention. Atsushi Mimura, the top currency official at the Finance Ministry, has not commented publicly. But the move occurred just as the US dollar weakened following the Federal Reserve's latest decision - a strategist noted that this created an advantageous moment for Japanese authorities to act in line with market trends.
The catch: The foreign exchange market is massive and deep. One country buying its own currency, even with billions of dollars, can only push so hard against the tide.
Market participants are closely watching the Bank of Japan's forthcoming policy announcement, which is due shortly. Most analysts think the BOJ will hold rates steady after its recent hike. But some strategists say the timing of this suspected intervention makes the meeting more interesting.
TS Lombard economist Rory Green commented, "Previous interventions have been followed by BOJ hikes, most recently in mid-2024. A move tomorrow would still be a surprise, but the meeting is now live."
Takeru Yamamoto, a currency trader based in New York at Sumitomo Mitsui Trust Bank, offered a simple observation: "Intervening now could make investors think twice about selling the yen."
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