The value of the yen against the dollar fell to the lowest level in a year, and the yen-dollar exchange rate broke through the 150 yen level, the ‘psychological resistance level’. However, as the exchange rate fell noticeably again, there was speculation that the government was intervening.
According to Bloomberg News on the 4th, the yen was once traded at 150.16 yen per dollar in the New York foreign exchange market on the 3rd. This is the highest since October of last year, and was influenced by the U.S. Department of Labor’s report that day showing a significant increase in the number of job openings, raising concerns about the prolonged Fed tightening. Within a few seconds, it fell by about 2% (strong yen, weak dollar) to 147.43 yen.
The yen-dollar exchange rate was around 138 yen as of July 13th. Some estimate that the Japanese foreign exchange authorities view the exchange rate of 150 yen as the intervention limit, as they did last year.
Commenting on the possibility of Japanese authorities being involved, CIBC’s global head of foreign exchange strategy, Biban Lai, said, “We won’t know until official confirmation, but it certainly seems likely.” Japanese Finance Ministry officials did not answer whether Japan had intervened in the yen.
Some believed that checking the exchange rate with the bank may have been the trigger, rather than the intervention of the authorities. Checking the exchange rate with a bank is often seen as a step before officially intervening in the market.
The Federal Reserve recently expressed the possibility of keeping interest rates higher for longer to curb inflation. According to experts, the interest rate difference between Japan, which maintains ultra-low interest rates, and the United States, which has tightened interest rates, is analyzed as the biggest cause of the yen’s weakness.
Earlier on this day, before the yen broke through 150 yen, Japanese Finance Minister Shunichi Suzuki said, “We are watching the market closely and are ready to respond.” When asked whether the level of 150 yen to 1 dollar was the standard for intervention, he replied, “The possibility of foreign exchange intervention will be judged through volatility, not the exchange rate level.”
The Japanese government’s first foreign exchange intervention last year took place in September last year when the yen weakened to 145.90 yen. Japan spent about $65 billion to support the yen three times from September to October, intervening in the market for the first time in 24 years. The yen’s lowest value in October last year was the lowest since the early 1990s.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.