Yen jumps as Japan threatens more intervention

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The yen held firm on Tuesday as traders remained on alert to the prospect of a coordinated currency intervention by authorities in the U.S. and Japan.

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The yen jumped against the dollar for a second day on Friday, as traders stayed on alert for more currency intervention after Reuters ​and others reported Tokyo had acted to ​prop up the Japanese currency, ​while other major currencies drifted in holiday-thinned trading.

Japan’s top currency diplomat Atsushi Mimura on Friday said speculative positions remained in the markets, putting traders on notice of possible further interventions to bolster the yen.

Following those remarks, in early London trading on Friday the yen suddenly strengthened ⁠from ‌around 157.1 per dollar to 155.49. It then retreated and was last ⁠at 156.6.

The price action marked a second day of sharp moves for the yen. Two sources familiar with the matter told Reuters that officials had intervened to buy the yen on Thursday after it hit 160.7 to the dollar, its weakest since July 2024.

$35 billion intervention

Central bank data ‌published on Friday showed Japan may have spent as much as 5.48 trillion yen ($35 billion) in the intervention, just shy of the $36.8 billion last spent in July 2024. The currency has been under pressure from wide U.S.-Japan interest ​rate gaps, and its weakness has been exacerbated by higher oil prices due to the Iran war that have boosted the U.S. dollar.

Japanese authorities are unhappy with the yen’s weakness that could worsen inflation in Japan.

Jordan Rochester, head of EMEA fixed income, currency and commodity strategy at Mizuho, said in a note that markets suspected Friday’s yen ⁠move reflected further intervention and that Mimura’s remarks were “clever messaging (as) otherwise markets would simply fade (Thursday’s) move”.

He flagged that Japanese authorities in 2022 and 2024 ‌had carried out further currency interventions after an initial move.

“Longer term, unfortunately for Japan, the ‌currency will remain under pressure the longer this war/blockade goes on and oil remains strong. FX intervention will only get them so far,” Rochester said. Largely due to the intervention, the dollar has fallen 1.7% against the yen this week, its biggest fall since early February. Data on Friday showed ⁠Japan’s core inflation slowed in April as government subsidies blunted the effect of energy prices, but analysts expect price gains ⁠to accelerate from here, keeping pressure on the central bank to hike rates.

Elsewhere activity on currency ⁠markets was limited as much of Europe is marking the May 1 holiday, as is Japan.

The euro rose 0.15% to $1.175, after strengthening on ​Thursday, partly in sympathy with the move in the yen, and ‌also from some month-end rebalancing flows. Also on Thursday, the ECB and the Bank of England kept interest rates unchanged, as expected, following holds earlier in the week by the Federal Reserve and Bank of Japan.

The ECB and BOJ, however, signaled readiness to hike rates as soon as June to try to contain the impact of inflation from the cost of imported energy.

The Australian dollar slipped 0.1% versus the U.S. dollar to $0.7192, ​after closing above the $0.72 level on Thursday for ‌the first time since June 2022. The Swiss franc was steady at 0.7810 per dollar.

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