The Japanese yen surged on Thursday, in a move analysts said bore the hallmarks of official intervention by Tokyo to prop up a currency that has slumped to four-decade lows against the dollar.
The dollar fell by as much as 3% to 158.34 , down from 40-year highs hit earlier this week, and was set for its biggest one- day fall since late 2022.
Markets have been on alert for yen-buying by Japanese authorities, who have warned of action for months as currency weakness exacerbates the cost-of-living impact of rocketing energy import prices.
The move came ahead of the Bank of Japan (BOJ) meeting on Friday, and followed Wednesday’s divided Federal Reserve meeting which left interest rates unchanged and sent the dollar sliding.
Currency analysts said a backdrop of month-end positioning, weak U.S. economic data and the broadly soft U.S. dollar may have provided Japanese authorities with a good opportunity to support their embattled currency.
The Japanese finance ministry’s (MOF) foreign exchange division, which directs intervention, could not be reached immediately for comment.
It was not immediately clear what drove the market move or whether Japanese authorities were in the market.
Japanese Finance Minister Satsuki Katayama has in recent times reiterated the government’s readiness to take action in the foreign exchange market.
“There has been a sharp move lower in dollar/yen that strongly suggests official intervention,” said Roberto Cobo Garcia, head of G10 FX strategy at BBVA.
“It appears Japanese authorities have taken advantage of the bearish momentum generated by the weaker U.S. data to sell dollars and support the yen.”
Sources said recently the MOF could step in abruptly to wipe out speculative yen positions, departing from the calibrated jawboning that preceded previous bouts of intervention.
The Japanese currency also tumbled sharply against other peers, falling over 2% against each of the euro and pound. ,
YEN NEAR 40-YEAR LOWS
In real terms the yen is trading near record lows and has been under pressure for years thanks to Japan’s low interest rates and worries that Prime Minister Sanae Takaichi wants to suppress borrowing costs to fund spending increases.
Her government has said that the weak yen has started harming the economy, via higher import costs.
Japanese authorities spent more than $70 billion in dollar-selling intervention in April and May though the yen soon gave back those gains.
“Given the circumstances, it is reasonable to think that intervention was likely conducted,” said Yuji Saito, executive advisor, SBI FX Trade, in Tokyo.
“The key question is whether authorities will keep pushing until the dollar breaks below the 155-yen line. We want to gauge that as just how serious the government is about defending the currency. ”
