3 weeks ago
Yen Firms After Landmark Intervention, Dollar Near Six-Week Lows
The yen is Japan's money.
Lately it became very weak—the weakest in 40 years.
A weak currency can make things cost more in Japan.
So Japan and the United States worked together to buy yen and make it stronger.
It was the first time America helped buy yen since 1998.
The yen got stronger on Monday but then settled near 157 yen per dollar.
The U.S. dollar also became a little weaker because people hope the war with Iran may end.
When people worry less, they buy fewer safe dollars.
Lower oil prices also made traders think the Federal Reserve might not raise interest rates.
Everyone is now waiting for the U.S. jobs report on Friday to see what happens next.
The yen steadied around 157.72 per dollar on Wednesday after a historic joint U.S.-Japan intervention.
Friday's coordinated yen-buying was the first such U.S. intervention since 1998.
The dollar hovered near six-week lows as optimism over Iran talks and oil near $80 a barrel reduced safe-haven demand.
U.S. Treasury Secretary Scott Bessent said Washington would do 'whatever it takes' to support Japan's yen stabilization.
Traders await Friday's U.S. jobs report, while the Bank of Japan may raise rates at its September 17-18 meeting.
- Who
- The Japanese yen, U.S. Treasury Secretary Scott Bessent, the Bank of Japan, the Federal Reserve, and currency traders.
- What
- A historic joint U.S.-Japan yen-buying intervention steadied the yen while the dollar hovered near six-week lows.
- Where
- Global currency markets, with action centered on Tokyo and Washington.
- When
- Early August, with markets reacting on Wednesday, August 5, following Friday's intervention.
- Why
- Authorities acted to stabilize the yen after it hit a 40-year low, while optimism over Iran talks and lower oil prices curbed safe-haven demand for the dollar.
Intervention Backers
Market Skeptics
Effectiveness of currency intervention
Intervention Backers
U.S. Treasury Secretary Scott Bessent pledged the U.S. will do 'whatever it takes' to support Japan's efforts to stabilize the yen, and officials intervened jointly to back the currency.
Market Skeptics
Analysts call the intervention a 'sticking plaster' containment exercise that rarely changes longer-term trends unless underlying fundamentals shift.
Federal Reserve policy outlook
Intervention Backers
Kansas City Fed President Jeff Schmid said some monetary policy tightening is needed to bring 'too high' inflation back to the Fed's 2% target.
Market Skeptics
Traders attached a lower chance of a September Fed rate hike—just below 60%—as lower oil prices eased inflation concerns.
Bank of Japan rate path
Intervention Backers
Bessent said he is sure Bank of Japan Governor Kazuo Ueda will 'do what is best' for Japan's economy, heightening expectations of a rate hike at the September 17-18 meeting.
Market Skeptics
Analysts say a more aggressive BOJ hiking approach is one of three conditions needed to sustain yen gains, and intervention alone rarely changes the trend.
Key facts
- Yen level (Wednesday)
- 157.72 per dollar
- Yen level (Monday peak)
- 155.2 per dollar
- Yen weakest level (prior week)
- Around 164 per dollar, weakest in 40 years
- Dollar index
- 99.70, down 0.16%
- Oil price
- Around $80 a barrel
- Fed September rate-hike probability
- Just below 60%
- BOJ next policy meeting
- September 17-18
- Last U.S. yen-buying intervention
- 1998
Quotes
U.S. Treasury Secretary Scott Bessent
U.S. Treasury Secretary
“"Whatever it takes" to support Japan's efforts to stabilize the yen”
livemint.com
“"Do what is best" for Japan's economy”
livemint.com
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CIBC Capital Markets head of G10 FX strategy Jeremy Stretch
FX strategy head at CIBC Capital Markets
“"the phrase 'sticking plaster' does feel relatively appropriate"”
livemint.com
Sources
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