US Dollar Ignores Suspected Japan’s intervention

The dollar rallied on Monday, and seems to ignore the suspected Japanese intervention. The American currency, instead, is sending China’s offshore yuan to record lows, while the British pound hesitated as Britain’s Conservative party raced to choose its third leader this year, eventually Rishi Sunak won both leadership of the party and of UK government.

The yen touched the 149.70 per dollar low overnight before moving up to the 145.28 high within minutes in a move that suggested the Bank of Japan, acting for Japan’s Ministry of Finance, stepped in for a second day. The yen was last at 149.05, down 0.9% on the day against the dollar.

As with the prior round of intervention when US dollar/yen was up above 145.00, it seems the half-life of the impact from intervention is very short indeed according to Saxo Bank.

The yen’s overnight volatility surged to its highest since September 21, the day before the BOJ stepped in to prop up the currency for the first time since 1998. Japan spent a record 5.4 trillion-5.5 trillion yen ($36.16 billion-$36.83 billion) in its yen-buying intervention last Friday, according to estimates by Tokyo money market brokerage firms.

Investors and traders suspect the BOJ has intervened more than once in the past month to shore up a currency that has tumbled 22% this year against the dollar. The Japanese government committed to keeping borrowing costs ultra-low. That is to say, the Bank of Japan is intervening in bond markets to keep yields under control.