The yen strengthened suddenly and significantly against the dollar Thursday night in a jump that suggests intervention by the Japanese government.
Around 10:30 p.m. Thursday, the currency went from ¥162.80 to the ¥157 mark to the dollar in a matter of about an hour.
As of Friday morning, the yen has fallen to the ¥160 mark.
No official confirmation of a possible intervention was made, but U.S. authorities reportedly conducted a rate check, suggesting possible joint action with Japan. A rate check, where a central bank asks financial institutions for exchange rates, is widely seen as a precursor to an intervention.
U.S. Treasury Secretary Scott Bessent also reportedly told Fox Business on Thursday that the yen is undervalued.
Finance Minister Satsuki Katayama has repeatedly issued verbal warnings in the past several weeks that “decisive action” would be taken.
The move came after the yen broke through ¥163 to the dollar last week — a four-decade low for the currency — partly due to escalating Middle East tensions that prompted safe-haven dollar buying.
The timing also coincides with the conclusion of the U.S. Federal Reserve’s Federal Open Market Committee meeting on Wednesday that decided to maintain its policy rate. It is conceivable that Japan waited to see the subsequent reaction of the Fed’s policy decision, as a rate hike was not completely ruled out by investors.
If the Fed had raised rates or sent a clear hawkish signal, the yen would likely have faced further downward pressure.
Although the Japanese government appeared to have finally stepped in, analysts expect the effects of the intervention to be short-lived.
A $73 billion intervention that began in late April, after the yen breached ¥160 to the dollar, briefly pushed the currency back to around ¥155. But those gains vanished within a month.
AloJapan.com