Ella 
The recent strength observed in both the Chinese yuan (CNY) and Japanese yen (JPY) has been underpinned by decisive moves and verbal assurances from their respective central banks, signaling a commitment to stability in currency markets.
The People’s Bank of China (PBoC) took a proactive stance by setting the daily fix for USD/CNY at 7.0996, surpassing expectations and indicating a slight decrease from the previous fix of 7.1004. This action served to alleviate concerns surrounding deliberate devaluation, reaffirming the PBoC’s dedication to maintaining stability in the yuan’s exchange rate.
Speculation had mounted over a potential downward correction for the renminbi, particularly following the PBoC’s decision to raise the daily fix last Friday. Despite broader strength in the US dollar in recent weeks, fueled by expectations of monetary easing abroad and the dollar’s resurgence, Chinese policymakers have emphasized the importance of currency stability, casting uncertainty over the possibility of USD/CNY revisiting previous highs.
Similarly, the Japanese yen has faced downward pressure despite the Bank of Japan’s (BoJ) efforts to tighten monetary policy in response to rising inflation. The decision to move away from negative rate policies and yield curve control has seen USD/JPY approaching multi-year highs around the 152.00 level. Concerns over yen weakness have prompted considerations of verbal intervention from Japanese officials to curb further upside for USD/JPY.
Masato Kanda, Japan’s top currency official, highlighted the disparity between recent yen depreciation and underlying fundamentals, attributing it to speculative forces. He reiterated Japan’s readiness to take appropriate measures, including direct intervention if necessary, to counter excessive fluctuations in the currency market. Kanda emphasized Japan’s vigilance in maintaining currency stability amidst market turbulence, pointing out the significant fluctuations observed in USD/JPY over a short period.
In summary, the recent strength in both CNY and JPY underscores the pivotal role of central bank actions and verbal interventions in ensuring stability amid evolving economic conditions and speculative pressures.
