Yen Moves gains in Asian trade on Monday against a basket of major currencies, continuing its upward trend for the third consecutive session and distancing itself from 38-year lows. This surge in the yen follows speculation that the Bank of Japan (BoJ) intervened in the forex market to bolster the currency during the US holiday on Thursday.
The Price
The USD/JPY pair declined by 0.3% to 160.26, reaching a session high of 160.81. On Friday, the pair increased by 0.3%, marking the second consecutive gain as it moved away from 38-year lows at 161.95. The yen’s strength was also supported by lower US treasury yields in response to disappointing economic data.
Japanese Authorities
Last week, the Japanese government maintained a reserved stance regarding the weakening yen. Finance Minister Shunichi Suzuki mentioned that the government is monitoring the situation, but traders speculate that intervention occurred during the US Fourth of July holiday to support the yen.
BoJ Intervention
The Bank of Japan initiated forex market interventions in late April after the Yen Moves fell below the 160 per dollar mark for the first time since 1990. The timing was deliberate, coinciding with a US holiday to ensure limited market liquidity and maximize impact.
US Yields
US 10-year treasury yields hovered near a weekly low at 4.271% on Monday, reducing the attractiveness of the dollar. This decline followed a series of discouraging US economic reports last week, including a contraction in the services sector for the first time since January 2023. These developments have increased market expectations for a Federal Reserve interest rate cut, with probabilities rising to 78% for September and 87% for November.
Conclusion
The yen’s recent strength underscores investor sentiment and speculation around central bank interventions, particularly in response to weakening economic data and lower US treasury yields. As global economic uncertainties persist, market participants will continue to monitor currency movements and potential central bank actions closely.
FAQs
Why did the yen strengthen? The yen strengthened due to speculation that the Bank of Japan intervened in the forex market to boost the currency amidst the US holiday and amid lower US treasury yields.
What is the current exchange rate for USD/JPY? The USD/JPY pair traded at 160.26, with a session high of 160.81, reflecting a decline in the dollar’s value against the yen.
When did the Bank of Japan last intervene in the forex market? The Bank of Japan intervened in late April after the yen dropped below 160 per dollar for the first time since 1990, choosing a US holiday for maximum market impact.
Why are US treasury yields important for currency movements? US treasury yields impact currency movements as lower yields reduce the attractiveness of the dollar to investors, influencing exchange rates like USD/JPY.
What are market expectations regarding US Federal Reserve interest rates? Market expectations suggest a high probability of a Federal Reserve interest rate cut, with odds rising to 78% for September and 87% for November, following weak US economic data.