Japan appeared to intervene in currency markets on Thursday, sending the yen up by the most since 2022 and pulling the dollar off four-decade highs. Treasury Secretary Scott Bessent said the yen is very undervalued and called the recent volatility unhealthy, as traders now watch Friday's Bank of Japan meeting for the next signal on rates.
The yen jumped against the U.S. dollar by the most since 2022 on Thursday, in what analysts described as official intervention by Tokyo to prop up a currency that had been languishing at four-decade lows. Japan's finance ministry could not be reached immediately for comment.
Treasury Secretary Scott Bessent, meanwhile, said the yen is very undervalued in a Fox Business interview. He also said the currency has substantially overshot equilibrium and that Washington views the excess volatility as unhealthy.
Dollar falls from 40-year highs
The dollar fell by as much as 3% to 158.34, down from 40-year highs near 164 yen hit earlier in the week. Trading volumes surged: Citi's sales and trading desk said its eTrading unit recorded an estimated $8.1 billion of dollar/yen selling between 0930 and 0940 ET.
According to Citi's sales and trading desk: "Intervention looks plausible."
The yen also jumped over 2% against the euro and pound and almost 2% against Australia's dollar. It would not be the first intervention this year: Japanese authorities already spent more than $70 billion on dollar-selling intervention in April and May, though the yen later gave back those gains.
BOJ decision looms Friday
The Bank of Japan is widely expected to keep short-term interest rates steady at 1% at a two-day meeting concluding Friday. Hawkish board member Hajime Takata may dissent and push for a rate hike to 1.25%, and most analysts polled by Reuters expect the BOJ to raise rates to 1.25% by year-end.
Core consumer inflation held at 1.6% in June, below the BOJ's 2% target for a fifth straight month.
Traders are now watching Governor Kazuo Ueda's post-meeting briefing for signs of the pace of further hikes. Should the messaging point to a slower pace of tightening, the yen could give back its gains quite quickly.
Sources: Reuters via Investing.com, Reuters via Investing.com, InvestingLive (snippet-based)
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