Yen Rises on Intervention Reports as U.S. and Japan Are Said to Buy the Currency
The yen rose on Friday after authorities in Japan and the United States were reported to have acted to support it. The yen gained more than 1% against both the dollar and the euro. People familiar with the matter said Japanese authorities entered the market during New York trading hours on Friday to buy yen and sell dollars. Earlier media reports said the Japanese government and the Bank of Japan had intervened for a second consecutive day. Other media reports said the Federal Reserve Bank of New York, acting on behalf of the U.S. Treasury, sold euros and bought yen. Media reports described the action as the first joint intervention by the U.S. and Japan in nearly 30 years. The U.S. Treasury had not responded to the reports, while officials at Japan's Finance Ministry had not commented. Two people familiar with the matter had earlier said the New York Fed contacted at least two large U.S. banks during the day to request euro-yen quotations. A photograph also showed that U.S. Treasury Secretary Scott Bessent's notebook contained a to-do list reading “Buy Yen $5 billion-$10 billion” while he attended a Cabinet meeting with President Donald Trump at Camp David on Friday local time. The photograph was taken during a portion of the meeting open to the media, at 11:33 a.m. Eastern time, or 23:33 Beijing time. Bessent's nameplate was positioned directly above the notebook. The actions by the U.S. and Japan over several days showed coordination aimed at curbing the yen's decline. The yen had reached its lowest level since 1986 the previous Sunday. Rising oil prices, Japan's persistent fiscal deficits and wide interest-rate differentials between Japan and the United States and other major economies have continued to weigh on the currency. “Traders will be alert to the possibility of further intervention by the authorities,” said Alex Loo, an economist at TD Securities in Singapore. Japan intervened in the foreign-exchange market first on Thursday, when the yen's maximum intraday gain reached 3.3%. Estimates based on Bank of Japan account data and currency-broker forecasts put the size of that intervention at about 8.45 trillion yen, equivalent to $52.8 billion. It was likely Japan's largest-ever single-day foreign-exchange intervention. Data from CME Group showed that heavy buying on Thursday pushed yen trading volume to its highest level in nearly 12 years. The market was volatile on the final trading day of the week. The yen gained about 1.3% against the dollar and closed near its intraday high at 157.28. Bessent wrote on social media that the U.S.-Japan “relationship is strong, and we remain in close communication and coordination,” prompting further speculation that the authorities could launch another round of intervention. Bessent had previously said on Fox Business that the yen was “significantly undervalued” and that large, disorderly exchange-rate moves were harmful to markets. The Bank of Japan left interest rates unchanged in its decision on Friday, in line with most economists' expectations. At a post-meeting news conference, Governor Kazuo Ueda did not send a strongly yen-positive signal. He only hinted that a rate increase could be possible at a future meeting, without giving a clear signal that a hike was imminent. The developments raised questions about whether foreign-exchange intervention can have a lasting effect. “Without interest-rate-differential fundamentals supporting it, the effect of foreign-exchange intervention is usually short-lived,” Evercore ISI strategists Marco Casiraghi and Gang Lü wrote Friday. “Although the central bank acknowledges that exchange-rate volatility poses an inflation risk, the Bank of Japan has so far been unwilling to take more aggressive policy measures to support the yen.” Analysts Michael Cahill and Lexi Kanter said that while intervention cannot fundamentally resolve the yen's weakness, it can have an effect in the short term. Their report also said Japan has ample foreign-exchange reserves and can continue intervening for some time. “The central question is whether dollar-yen can hold below 160 and stop moving steadily higher,” Jane Foley, head of foreign-exchange strategy at Rabobank, said in an interview Friday. “Market sentiment is highly tense.” Data released Friday by the U.S. Commodity Futures Trading Commission showed that hedge funds had continued increasing their yen short positions before this week's intervention took place. As of July 28, hedge funds held yen short contracts worth $9.5 billion, totaling 124,575 contracts, only slightly below the highest short position since 2007, reached in June.
People familiar with the matter said Japanese authorities entered the market during New York trading hours on Friday to buy yen and sell dollars. Earlier media reports said the Japanese government and the Bank of Japan had intervened for a second consecutive day. Other media reports said the Federal Reserve Bank of New York, acting on behalf of the U.S. Treasury, sold euros and bought yen.
Media reports described the action as the first joint intervention by the U.S. and Japan in nearly 30 years. The U.S. Treasury had not responded to the reports, while officials at Japan's Finance Ministry had not commented.
Two people familiar with the matter had earlier said the New York Fed contacted at least two large U.S. banks during the day to request euro-yen quotations.
A photograph also showed that U.S. Treasury Secretary Scott Bessent's notebook contained a to-do list reading “Buy Yen $5 billion-$10 billion” while he attended a Cabinet meeting with President Donald Trump at Camp David on Friday local time. The photograph was taken during a portion of the meeting open to the media, at 11:33 a.m. Eastern time, or 23:33 Beijing time. Bessent's nameplate was positioned directly above the notebook.
The actions by the U.S. and Japan over several days showed coordination aimed at curbing the yen's decline. The yen had reached its lowest level since 1986 the previous Sunday. Rising oil prices, Japan's persistent fiscal deficits and wide interest-rate differentials between Japan and the United States and other major economies have continued to weigh on the currency.
“Traders will be alert to the possibility of further intervention by the authorities,” said Alex Loo, an economist at TD Securities in Singapore.
Japan intervened in the foreign-exchange market first on Thursday, when the yen's maximum intraday gain reached 3.3%. Estimates based on Bank of Japan account data and currency-broker forecasts put the size of that intervention at about 8.45 trillion yen, equivalent to $52.8 billion.
It was likely Japan's largest-ever single-day foreign-exchange intervention. Data from CME Group showed that heavy buying on Thursday pushed yen trading volume to its highest level in nearly 12 years.
The market was volatile on the final trading day of the week. The yen gained about 1.3% against the dollar and closed near its intraday high at 157.28.
Bessent wrote on social media that the U.S.-Japan “relationship is strong, and we remain in close communication and coordination,” prompting further speculation that the authorities could launch another round of intervention. Bessent had previously said on Fox Business that the yen was “significantly undervalued” and that large, disorderly exchange-rate moves were harmful to markets.
The Bank of Japan left interest rates unchanged in its decision on Friday, in line with most economists' expectations. At a post-meeting news conference, Governor Kazuo Ueda did not send a strongly yen-positive signal. He only hinted that a rate increase could be possible at a future meeting, without giving a clear signal that a hike was imminent.
The developments raised questions about whether foreign-exchange intervention can have a lasting effect.
“Without interest-rate-differential fundamentals supporting it, the effect of foreign-exchange intervention is usually short-lived,” Evercore ISI strategists Marco Casiraghi and Gang Lü wrote Friday. “Although the central bank acknowledges that exchange-rate volatility poses an inflation risk, the Bank of Japan has so far been unwilling to take more aggressive policy measures to support the yen.”
Analysts Michael Cahill and Lexi Kanter said that while intervention cannot fundamentally resolve the yen's weakness, it can have an effect in the short term. Their report also said Japan has ample foreign-exchange reserves and can continue intervening for some time.
“The central question is whether dollar-yen can hold below 160 and stop moving steadily higher,” Jane Foley, head of foreign-exchange strategy at Rabobank, said in an interview Friday. “Market sentiment is highly tense.”
Data released Friday by the U.S. Commodity Futures Trading Commission showed that hedge funds had continued increasing their yen short positions before this week's intervention took place. As of July 28, hedge funds held yen short contracts worth $9.5 billion, totaling 124,575 contracts, only slightly below the highest short position since 2007, reached in June.