The Japanese yen briefly strengthened to 153 against the dollar on the New York market on Wednesday, prompting speculation of market intervention by the Japanese government and the Bank of Japan.
The Japanese currency’s surge of more than 4 yen from the 157-yen range followed a news conference by US Federal Reserve Chair Jerome Powell.
Currency traders say it is highly likely that Japan’s central bank intervened, but Japan’s Vice Minister of Finance for International Affairs Kanda Masato said he had no comment on the yen’s move.
Helen Given, a foreign-exchange trader at Washington-based Monex USA, told NHK that traders typically expect to see a swing of two whole yen in the case of intervention, and Wednesday’s move far exceeded that threshold.
She said it was ”a very smart time” for the Bank of Japan to step in since markets in Europe and Mexico were closed for May Day and the Fed had been ”rather dovish” in the news conference after its policy meeting. That meant any moves in currency markets would have an outsize impact.
Given added that the fundamentals of the Japanese economy are still fairly weak: GDP is not very strong and production continues to decline.
She said she does not think the BOJ will raise interest rates until at least the fall, and even then the wide interest rate differential between Japan and the United States will remain.
Given also said that while intervention can be effective in the short term, it will not necessarily stop the yen from being weaker a year from now than it is today.
Regarding the Fed’s monetary policy, Given said that Powell placed emphasis on inflation, but he would not go so far as to say it is resurgent, so she still expects two rate cuts this year.