The dollar dropped as much as 3% against the yen on Thursday in a move analysts say carries the signature of official Japanese intervention. The slide came a day before the Bank of Japan's policy meeting and followed a Federal Reserve decision that left US interest rates unchanged.
The dollar sank as much as 3% against the yen on Thursday, sliding to 158.34, in a move analysts said bore the hallmarks of official intervention by Tokyo. The drop left the dollar set for its biggest one-day fall since late 2022, landing a day before the Bank of Japan's policy meeting on Friday.
Fed pause and soft US data set the stage
Wednesday's divided Federal Reserve meeting left interest rates unchanged and sent the dollar sliding broadly. Currency analysts said month-end positioning, weak US economic data and a broadly soft dollar may have handed Japanese authorities a good opportunity to support their embattled currency.
ActionForex reported that second-quarter GDP expanded just 1.5%, below expectations. June core PCE inflation slowed to 3.3%, extending the broader disinflation trend. Even so, three Fed officials dissented in favor of an immediate rate hike.
BBVA: yen move "strongly suggests" intervention
According to BBVA's Roberto Cobo Garcia, head of G10 FX strategy: "There has been a sharp move lower in dollar/yen that strongly suggests official intervention." He said Japanese authorities appeared to have used the bearish momentum from the weaker US data to sell dollars and support the yen.
Japan's finance ministry, which directs intervention, could not immediately be reached for comment, and it remained unclear whether authorities were actually in the market. Reuters reported that Japanese Finance Minister Satsuki Katayama has repeated the government's readiness to act in the foreign-exchange market.
Yen still near 40-year lows despite the jump
Even after Thursday's jump, the yen remains under pressure in real terms, trading near record lows amid Japan's low interest rates and concern that Prime Minister Sanae Takaichi's government wants to keep borrowing costs down to fund higher spending. Her government has said the weak yen has started harming the economy through higher import costs. Japanese authorities spent more than $70 billion on dollar-selling intervention in April and May. The yen soon gave back those gains.
Interest-rate markets assign better than an 80% probability to a Bank of Japan rate hike in October, ActionForex said, though the yen has lagged Japanese bond yields in reflecting that outlook. Yuji Saito, executive advisor at SBI FX Trade in Tokyo, said the key question now is whether authorities keep pushing the dollar below the 155-yen line.
Sources: Forex News, ActionForex
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