Yen Jumps as Japan Likely Intervenes in Currency Market
The Japanese yen experienced a sudden surge against the US dollar on Monday, with traders attributing the jump to intervention by Japanese authorities. This intervention aimed to bolster the yen, which has been languishing near 34-year lows.
The dollar's value plummeted to 156.55 yen from a high of 160.245 earlier in the day. Trade sources reported sightings of Japanese banks selling dollars for yen, indicating intervention.
This action comes amidst growing concerns about the yen's depreciation. The currency has lost 11% of its value against the dollar this year, even after Japan's historic exit from negative interest rates.
While the Japanese Finance Ministry remained unavailable for comment due to a national holiday, Bank of Japan Governor Kazuo Ueda acknowledged the potential economic impact of exchange rate volatility. However, he emphasized that monetary policy does not directly target currency rates.
This intervention marks the fourth time Japan has intervened in the currency market since 2022. Previous interventions occurred in September and October 2022, when the yen approached a 32-year low of 152 to the dollar.
The yen's weakness stems from the widening interest rate gap between the US and Japan. Higher US rates have attracted investors seeking higher returns, leading to a shift from yen to dollars.
This situation prompted the US, Japan, and South Korea to agree on closer consultation regarding currency markets earlier this month. Additionally, Tokyo has intensified its rhetoric against excessive yen depreciation.
The yen's weakness extends beyond the US dollar, with the currency also hitting multi-year lows against the euro, Australian dollar, and Chinese yuan.