The U.S. dollar experienced a sharp decline against the yen on Tuesday, shortly after briefly surpassing 150 for the first time since October 2022. This sudden drop has left the market in a state of confusion, with traders questioning whether the Bank of Japan (BOJ) intervened.
The surge in the dollar was driven by the significant increase in U.S. Treasury yields, causing it to rise as high as 150.165 yen. However, the sharp decline soon followed, leaving traders to speculate about potential intervention by the BOJ.
Niels Christensen, the chief analyst at Nordea in Copenhagen, highlighted the nervousness in the market surrounding the 150 level. He explained, “For me, it’s nervousness with traders cutting their long positions. I imagine if this was intervention then they would confirm it to make the most of it. They would follow it up with more to really wash out the long dollar-yen positions.”
At this moment, Japan’s finance ministry and the New York Federal Reserve have not provided any comments regarding the situation.
It is worth noting that Japan previously purchased yen in September 2022, marking its first intervention in the market since 1998. This move was made to protect its currency after the BOJ opted to maintain an ultra-loose monetary policy, resulting in the yen dropping to 145 per dollar. Additionally, Japan intervened again in October last year when the yen hit a 32-year low of 151.94.
The yen has been under pressure for the past year due to the significant difference in interest rates between Japan and other developed economies, including the United States. While other central banks have raised borrowing costs, the BoJ has maintained low rates, contributing to the weakness of the yen.
Overall, the sudden weakening of the U.S. dollar against the yen has caused confusion in the market, with traders speculating about potential intervention by the Bank of Japan. As the situation unfolds, it remains to be seen how the currency exchange between the dollar and yen will be affected in the coming days.
More detail via Reuters here… ( Image via Reuters )