The Japanese yen surged to its highest level in over two months on Wednesday, fueling speculation that Japanese authorities may have intervened in the currency market once again. The yen appreciated by as much as 1.8% to 155.04 per U.S. dollar, marking its strongest position since February 24th. This follows a previous intervention by Japanese officials on April 30th, the first such move in 2024, which triggered an intraday spike of 3% for the yen.
While Japanese officials have declined to comment directly on whether intervention occurred, sources familiar with the matter confirmed the action. Analysis of the Bank of Japan's accounts suggests the government may have spent approximately $34.5 billion. Rodrigo Catril, a strategist at National Australia Bank, noted, "USD/JPY gapped lower at the open, with all signs pointing to intervention. Recent price action further confirms the Ministry of Finance's urgency to prevent the yen from weakening to the 160 level while also attempting to curb speculative short-selling."
The yen's rise on Wednesday coincided with broad-based U.S. dollar weakness and reduced safe-haven demand, following hints from former U.S. President Donald Trump about progress toward a final deal with Iran. Japanese markets were closed for a holiday, but the yen's advance suggested potential further action by authorities. Neil Jones, Head of FX Sales at TJM Europe, commented, "I believe this is the Ministry of Finance further selling USD/JPY to the Bank of Japan. If the ministry wants to send a clear signal, it needs to push USD/JPY below 155, even down to 153.50—perhaps setting a target of 150."
Analysts at Goldman Sachs stated that Japan has the capacity to intervene in the forex market around 30 times, similar to last week's scale, but expect officials to conserve foreign reserves for more effective timing. In 2024, the yen repeatedly weakened to around 160.17, prompting authorities to spend a total of approximately $100 billion buying yen to support the currency. Additional measures were also taken when the yen fell to 157.99, 161.76, and 159.45.
Previously, a Japanese finance ministry official indicated that, according to International Monetary Fund guidelines, Japan could only conduct two more three-day interventions before November if it wishes to maintain its free-floating exchange rate system. Japanese Finance Minister Shunichi Suzuki stated on Monday that, under Japan-U.S. agreements, authorities can take resolute action against speculative currency movements. An official noted that intervention is possible even during Japanese public holidays, as long as global markets are open.
Analysis suggests the sudden drop in USD/JPY on Wednesday, for unclear reasons, led traders to suspect possible dollar selling by Japanese authorities. David Forrester, a senior strategist at Credit Agricole in Singapore, said reports about IMF guidelines "encouraged investors to push USD/JPY higher," adding, "This gives the Ministry of Finance and the Bank of Japan another opportunity to intervene to defend the USD/JPY level around 157, which appears to be the new line in the sand."
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