Japanese Yen Jumps on Tuesday Following BoJ Intervention Speculations

Today marked a further strengthening of the Japanese Yen as the USD/JPY fell below the 130 mark for the first time since June 2022.

Following the Bank of Japan’s policy reversal in December, speculation has grown about likely future tightening in 2023. Today is a holiday in Japan, so it will be interesting to see how the country responds to the recent developments.

Reversing Monday’s movements, the US dollar is now weaker against the majority of foreign currencies. The 10-year note’s back end gained a few basis points today, but the midpoint of the curve lost a few, giving US Treasury yields a mixed day across the curve.

Spectators Anticipate More Intervention in Japanese Yen

When the BoJ widened the yield cap range on 10-year Japanese government bonds (JGBs) in December, speculation that the bank was about to start abandoning its ultra-loose policy erupted. On December 31, a Nikkei report suggested that the BoJ was contemplating increasing its inflation projections for January so that price growth would be close to its 2% target in the fiscal years 2023 and 2024.

Moh Siong Sim, a currency strategist at the Bank of Singapore, stated that the market “obviously wants to believe that tinkering with the yield curve is not once and done,” adding that the market was looking for additional signals that there would be more adjustments made to the yield curve control settings.

However, BoJ Governor Haruhiko Kuroda has ruled out the possibility of ending the ultra-loose monetary policy soon.

At 129.83 per dollar on Tuesday, the yen increased by 0.69% against the dollar after briefly reaching 129.51 earlier in the session, a level last reached in June.

BoJ’s Intervention in the Yen

The Japanese government intervened in the market in September to support it for the first time since 1998, and again in October after it fell to a 32-year low of 151.94 per dollar, causing the Asian currency to lose 12% of its value versus the dollar in 2022.