Japanese Yen gathers strength as US, Japan confirm rare joint intervention
- USD/JPY weakens to near 157.40 in Tuesdayâs early Asian session.
- The coordinated intervention between the US and Japan supports the Japanese Yen.
- The US July jobs report will be in the spotlight on Friday.
The USD/JPY pair edges lower to around 157.40 during the early Asian trading hours on Tuesday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) as traders remain on alert for further intervention after Japan and the US stepped into the foreign exchange markets last week to support domestic currency.
Japan's Finance Ministry Satsuki Katayama said on Monday that Tokyo and Washington conducted coordinated âYen-buying intervention and will not hesitate to take further action. US Treasury Secretary Scott Bessent stated that the US wouldnât hesitate to step into the market again, while US President Donald Trump added his approval by describing the intervention as âa signal of friendship.â
According to Bloomberg, Japan likely used about $34 billion in currency market intervention on Friday to boost the JPY, building on the previous dayâs actions in coordination with the US.
"The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market and trigger an inflection,â said Bank of America analyst Shusuke Yamada.
Traders will take more cues from Friday's US July jobs data, which could offer hints about the US interest rate path. The US Nonfarm Payrolls (NFP) are expected to increase by 83,000 in July, versus 57,000 prior. The Unemployment Rate is projected to jump to 4.3% in July, up from 4.2% in June. In case of stronger-than-expected outcomes, this could reinforce bets on a Federal Reserve (Fed) September rate hike and support the Greenback.
Yen support operation weighs on exporters and Asian risk tone
BNY Mellonâs Geoff Yu notes that âtalk becomes actionâ in foreign exchange, with FX providing âthe clearest example of coordinationâ as the US and Japan have âjointly intervened to strengthen the yen, their first such operation since 1998.â He points out that the Yen ârallied sharply,â a move that has âweighed on Japanese exporters and contributed to a softer Asian session.â
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the worldâs most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japanâs policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japanâs mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJâs stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yenâs value against other currencies seen as more risky to invest in.
