On Monday, the Japanese yen experienced a sudden surge against the US dollar, reportedly due to intervention by Japanese authorities aimed at bolstering the currency, which has been hovering near its lowest levels in 34 years.
The dollar witnessed a significant drop, plummeting to 156.55 yen from an earlier high of 160.245 yen. Reports indicated that Japanese banks were observed selling dollars in exchange for yen.
Traders had been anticipating action from Tokyo to support the yen, which has depreciated by 11% against the dollar this year despite Japan's recent shift away from negative interest rates failing to provide a lift to the currency.
The Ministry of Finance of Japan was unavailable for immediate comment as the country was observing a holiday on Monday.
Kazuo Ueda, the governor of the Bank of Japan, mentioned during a press conference after a recent meeting that while monetary policy doesn't directly target currency rates, fluctuations in exchange rates could have significant economic repercussions.
Japan's intervention in the currency market occurred three times in 2022, involving the sale of the dollar to purchase yen. This action was taken in September and October as the yen approached a low not seen in 32 years, reaching 152 to the dollar.
The yen has been under pressure due to rising US interest rates while Japan's rates have remained close to zero, prompting investors to move funds from yen to dollars in pursuit of higher returns.
Earlier this month, the United States, Japan, and South Korea agreed to "closely consult" on currency markets, issuing a rare warning, and Tokyo has heightened its rhetoric against excessive movements in the yen.
Moreover, the yen has also experienced declines against other major currencies such as the euro, Australian dollar, and Chinese yuan, reaching multi-year lows.
Paraphrasing text from "Investing" all rights reserved by the original author.
