Yen Rebounds Slightly Amidst Speculation of Intervention

The Japanese yen staged a recovery on Wednesday, bouncing back from an 11-month low against the U.S. dollar. The sudden surge in the yen on the previous day had tongues wagging, with speculation rife that Japan had intervened in the currency market to bolster its weakening currency, which had tumbled to its lowest point since October 2022.

In the New York trading session, the Japanese yen was trading at 148.87 per dollar, marking a 0.08% increase. Just the day before, it had experienced a nearly 2% surge to 147.27 after dipping to 150.16.

Did Japanese Authorities Just Rescue the Yen?

This sharp uptick in the yen’s value led many to wonder if Japanese authorities had indeed stepped in to halt the currency’s slide, a move aimed at safeguarding the nation’s exporters and its overall economic recovery. It’s worth noting that Japan’s last foray into currency market intervention occurred back in 1998.

Japan’s top currency diplomat, Masato Kanda, chose not to confirm or deny the speculation surrounding the overnight intervention. He did, however, state, “We have only taken steps that have the understanding of U.S. authorities.” Meanwhile, the Bank of Japan’s money market data failed to reveal any signs of intervention on Tuesday.

Despite the intervention theory, some analysts dismissed the notion and attributed the yen’s fluctuations to market volatility and position unwinding. Nicholas Rees, an FX market analyst at broker Monex Europe, pointed out, “Markets have been hesitant to take USD/JPY north of 150 on intervention risk for a week now; it’s unsurprising to see skittish downside price action once the level was broken,” according to Reuters.

The yen has faced a tough year, depreciating by approximately 14% against the U.S. dollar. This depreciation can be attributed to the significant rise in U.S. bond yields compared to their Japanese counterparts, a consequence of the Federal Reserve’s interest rate hikes.

On another front, the dollar index, which gauges the greenback’s performance against six other currencies, was down 0.3% at 106.75 on Wednesday. This came after it had reached a nearly 11-month high of 107.34 the day before. A rally in stocks and bonds had pushed investors out of cash and into riskier assets, pressuring the dollar.