The yen climbed to ¥155 against the dollar on Monday, its strongest level in three months, after Tokyo and Washington confirmed a rare joint intervention to support the currency. The move follows a slide to a 40-year low last week, driven by Japan's low borrowing costs and prime minister Sanae Takaichi's stimulus push.
The yen strengthened to ¥155 to the US dollar on Monday, its highest level since early May, after Japan and the US carried out a rare joint currency intervention late last week. Tokyo's finance ministry said the two governments had conducted coordinated yen-buying intervention and would not hesitate to take further action.
Washington and Tokyo pledge more intervention
A rebound follows a sharp slide: the yen had weakened to a 40-year low of almost ¥164 to the dollar last week. According to The Guardian: Treasury secretary Scott Bessent said Washington "will not hesitate to participate in further joint intervention", while repeating calls for further interest rate rises from Japan's central bank.
A photograph of Bessent's meeting notebook taken Saturday showed his to-do list included buying $5bn-$10bn worth of Japanese yen. The action marks the first joint intervention by Japan and the US since March 2011, when the two governments acted to weaken the yen after the Tohoku earthquake and tsunami.
Carry trade and Takaichi's stimulus push drove the slide
The yen had weakened in recent months as Japanese borrowing costs stayed lower than in other advanced economies, fueling a so-called "carry trade" in which investors borrowed cheaply in yen to buy higher-yielding dollar assets. Investors have also worried about Takaichi's push to use tax and spending measures to stimulate the economy, and her criticism of the Bank of Japan's higher interest rates, which have added to the country's borrowing costs.
Analysts weigh how long the support will last
MUFG currency analyst Lee Hardman said the threat of further joint intervention and a faster pace of BoJ interest-rate hikes should give more support to the yen and discourage speculators from holding large short positions. Oxford Economics, however, said the coordinated intervention would not be enough to reverse the trend of yen weakness.
The consultancy said it still expects the Bank of Japan to wait until December for its next hike, arguing the intervention buys the central bank time to assess the impact of the Middle East conflict and past rate increases on the economy.
Source: Business | The Guardian
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