Tokyo, Japan – The dollar surged to a 34-year peak against the yen in early Thursday trading, marking a significant moment in the ongoing battle between the two currencies. This move stirred speculation in the market about potential intervention by Japanese authorities to stabilize the exchange rate. The dollar climbed above ¥153 against the yen, a level that analysts had warned could trigger direct intervention from Japan.
Following this surge, Masato Kanda, Japan’s vice-finance minister for international affairs, mentioned that authorities were ready to take action to address any excessive fluctuations in the exchange rate. While the recent movements were described as “rapid”, Kanda refrained from labeling them as “excessive,” indicating that the risk of intervention had not changed significantly.
The dollar’s strength against the yen was fueled by better-than-expected US inflation data for March, which altered projections for US interest rate cuts and led to a spike in bond yields and the dollar. This trend has put pressure on the yen, with traders expecting the interest rate differential between the US and Japan to continue driving the yen lower.
Analysts in Tokyo are closely monitoring any signs of a potential currency intervention by Japan’s ministry of finance, particularly through a “rate check” where officials assess the yen price offered by traders. However, there are concerns about the effectiveness of intervention, especially when currency movements are driven by broader factors such as dollar strength rather than Japan-specific issues.
Benjamin Shatil, a foreign exchange analyst at JPMorgan in Tokyo, suggested that Japanese officials might hold off on intervention unless fresh highs are tested in the dollar-yen pair. The prevailing sentiment among macro investors is that intervention could only slow down, not halt, the depreciation of the yen against other currencies.
Despite warnings from Japanese officials about speculative movements impacting the currency, the recent sharp rise in the dollar against a basket of currencies, including the yen, suggests resistance to fighting dollar strength. Market analysts believe that current dollar momentum may outweigh any immediate efforts by Japan to intervene in the currency market.