The Japanese yen boomeranged back on Monday after plunging to its lowest point against the dollar in over three decades last week, fueling speculation Tokyo had intervened.
The Wall Street Journal, citing anonymous sources familiar with the matter, reported the government had moved swiftly to support the currency was behind the sudden rally.
The yen has been generally depreciating against the greenback as the U.S. Federal Reserve keeps monetary policy tight amid sticky inflation and a robust labor market, with markets now betting the Fed will delay interest rate cuts.
Meanwhile, the Bank of Japan has maintained ultra-low interest rates and significant asset purchases to stimulate its economy, making the yen less attractive to investors seeking higher returns.
The dollar widened the gap on Friday, reaching 157.795 yen, a 34-year-high, amid U.S. reports of higher-than-expected inflation and the Fed signaling it will again hold off on hiking rates during its policy meeting Tuesday and Wednesday.
The euro reached a 16-year high of 168.85 yen before settling at 168.845 on Friday.
The yen had been trading at no higher than about 150 versus the dollar since March, when Japan's central bank ended the negative interest rates the country implemented in 2016 in an effort to spur growth.
"I won't comment now," said Masato Kanda, Japan's vice finance minister for international affairs, when asked on Monday if the government had moved stepped in to shore up the yen. He later told reporters the volatility the currency was showing was abnormal. "The damage such moves inflict on the economy is hard to overlook," he added.
Newsweek reached out to the Bank of Japan outside office hours via written request for comment.
On Monday, the yen further depreciated to 160 against the dollar, before rising sharply and ending at 156.83 per dollar.
With markets closed for Japan's Golden Week holiday, Trading volumes were thin on Monday, increasing the potential impact of a yen-buying intervention.
"The timing actually makes sense because you're going to have a thinner market, so they're going to get more effect out of whatever they do and that's why they chose to do it relatively early in the Asian market; they can push it around more," FX Street senior analyst Joseph Trevisani told Reuters.
The dollar's surge against the yen on Friday came after the Bank of Japan decided to maintain the interest rate of 0-0.1 that was set after the end of negative rates last month. BOJ Governor Kazuo Ueda forecasts rate hikes if inflation rises higher than projected.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Micah McCartney is a reporter for Newsweek based in Taipei, Taiwan. He covers U.S.-China relations, East Asian and Southeast Asian ... Read more
To read how Newsweek uses AI as a newsroom tool, Click here.
