Suspected intervention causes Japan’s yen to surge against the dollar

The yen surged against the dollar on Monday, as Japanese authorities intervened to stabilize the currency’s sharp decline to levels not seen in over three decades. The sudden jump saw the dollar plummet to 155.01 yen from a high of 160.245 earlier in the day, with Japanese banks reportedly selling dollars for yen.

Traders had been anticipating action from Tokyo to support the yen, which has dropped 11% against the dollar this year despite Japan’s exit from negative rates. The move, suspected to be a Bank of Japan intervention, comes ahead of the Federal Reserve’s policy review on May 1, with investors expecting a delay in rate cuts.

Japan has intervened in the currency market three times in 2022, spending billions to defend the yen. The United States, Japan, and South Korea recently agreed to monitor currency markets closely, with Tokyo ramping up rhetoric against excessive yen movements.

Nicholas Chia, Asia macro strategist at Standard Chartered Bank, believes that if the USD-JPY pair reaches 160 again, more intervention from the Ministry of Finance can be expected. The 160-level is seen as a pain threshold for authorities, signaling a new line in the sand for the currency.

The yen’s plunge to multi-year lows against other major currencies like the euro, Australian dollar, and Chinese yuan has raised concerns about its impact on the global economy. With ongoing volatility in the currency markets, traders and investors are closely watching for further developments from Japanese authorities to stabilize the yen.