The yen experienced a sudden jump against the dollar on Monday, attributed to yen-buying intervention by Japanese authorities aiming to support a currency that has been languishing at 34-year lows. The dollar fell sharply to 155.01 yen from a high of 160.245 earlier in the day, with banking sources noting that Japanese banks were seen selling dollars for yen. This intervention came amid growing concerns over the yen’s significant decline, as it has dropped 11% against the dollar this year.
Traders have been on edge for weeks, anticipating potential action from Tokyo to prop up the struggling currency, which has been affected by low Japanese interest rates compared to relatively high U.S. interest rates. Japan’s Ministry of Finance has not yet commented on the intervention, though market participants anticipate further action if the dollar-yen rate approaches the 160 level again. A weaker yen has been beneficial for Japanese exporters, but it presents challenges for policymakers due to increased import costs, inflationary pressures, and a squeeze on households.