Anna 
The yen experienced a sudden surge against the dollar on Monday, as Japanese authorities reportedly intervened to support a currency that has weakened to levels not seen in over three decades.
Traders observed a significant shift in the USD/JPY exchange rate, with the dollar falling sharply from earlier highs to 155.01 yen before settling around 155.50 yen. Japanese banks were noted selling dollars for yen, indicating intervention by authorities to bolster the yen’s value.
This move comes amid heightened concerns over the yen’s persistent decline, with the currency having depreciated by 11% against the dollar since the beginning of the year. Despite the Bank of Japan’s recent exit from negative interest rates, the yen continued to slide to 34-year lows.
Warren Hogan, chief economic adviser at Judo Bank, anticipates that the Reserve Bank of Australia (RBA) may implement three rate hikes in 2024, potentially reaching 5.1%, beginning as early as August. This outlook has contributed to strengthening the Australian Dollar (AUD) against the USD.
While Japan’s top currency diplomat, Masato Kanda, declined to comment on intervention, market analysts suggest that further interventions may occur if the USD/JPY exchange rate approaches 160, representing a critical threshold for Japanese authorities.
A weaker yen is beneficial for Japanese exporters but poses challenges for policymakers, including increased import costs, inflationary pressures, and household financial constraints.
The Bank of Japan (BOJ), while not targeting currency rates directly, acknowledges the significant economic impact of exchange-rate volatility. The widening yield gap between U.S. and Japanese government bonds, currently around 375 basis points, continues to drive investment flows out of yen and into higher-yielding assets.
The suspected intervention coincides with the Federal Reserve’s upcoming policy review, as expectations for rate cuts have been tempered by sustained U.S. inflation levels. Analysts highlight that a combined effort by the BOJ and Ministry of Finance (MOF) may be more effective in stabilizing the yen than unilateral intervention.
Japan’s recent interventions in the currency market underscore concerns over excessive yen depreciation, prompting closer consultations with U.S. and South Korean counterparts on currency market dynamics.
In addition to the dollar, the yen has also reached multi-year lows against other major currencies, reflecting broader concerns over its sustained weakness in global markets.
