Yen hits three-week high as Japanese authorities intervene

Yen rose in Asian trade on Friday against major rivals, extending gains for the third straight session against the dollar and scaling a three-week high away from recentt 34-year lows amid active short-covering.

The yen is heading for the largest weekly profit since November 2022 as Japanese authorities intervened to support the local currency after slumping below the 160 barrier for the first time since 1990 against the dollar. 

The 160 barrier has thus become a red line for Japanese authorities, with the Bank of Japan spending nearly $60 billion in the forex market to support the currency around that level. 

The yen benefitted as well from slower US 10-year treasury yields, which undermined the greenback and provided support to its main rivals, including the yen.

The Price 

The USD/JPY pair fell 0.5% today to 152.75 yen, the lowest since April 12, with a session-low at 153.75 yen. 

Yen gained 0.7% against the dollar yesterday, the second profit in a row, rebounding off 34-year lows at 160.21. 

 The gains are underpinned by interventions by the Japanese government, while US treasury yields drop and drag down the dollar following a somewhat bearish Federal Reserve’s meeting.

Weekly Trades 

The yen is up 3.5% so far this week against the dollar, on track for the first weekly profit in five weeks, and the largest since November 2022. 

Japanese Authorities 

Traders believe that Japanese authorities intervened for at least two days this week to boost the yen after trading below 160 yen per dollar.

The Wall Street Journal reported the government’s intervention spanning Monday and Wednesday, with a focus on low-liquidity days to maximize effects. 

How Did Japanese Authorities Intervene? 

On Monday, a Japanese public holiday, the dollar scaled a 34-year peak against the yen at 160.21, before collapsing to 154.40 by the European session, representing a 3.5% tumble, which is highly indicative of a direct government intervention. 

And on late Wednesday, the dollar suddenly tumbled 1% in five minutes late in the American session, with an additional 2% collapse within half an hour, with the yen ending the session up 2% against the dollar. 

CME Group’s data indicates that instant yen trading volumes on the EBS platform reached $77 billion on Monday, the highest since November 2016, and reached $42 on Wednesday, out of which 78% were focused in a single hour. 

Further Interventions

According to the current intervention strategy, it’s possible for upcoming public holidays in Japan and the UK this month to become windows for further aggressive interventions by the Bank of Japan. 

The Last Intervention 

The last time the Japanese government intervened to support the currency was in October 2022, when the dollar rose past 150, parking at 151.94, a 1990 high. 

The Japanese government back then quickly bought large amounts of yen and pushed the price towards 127 by January 2023, which is a 16% surge. 

A 160 Solid Barrier

It’s become clear that 160 has become a red line for the Bank of Japan, with reports indicating that Japanese authorities spent nearly $60 billion to conduct the latest intervention. 

US Yields

US 10-year treasury yields traded near two-week lows on Friday at  4.569%, pressuring the greenback.

The losses came after the Federal Reserve’s policy meeting this week, which proved less aggressive than expected and reignited hopes for rate cuts this year. 

Now investors await the all important US payrolls report later today to gather more clues on the likely path ahead for monetary policy.