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Japan’s yen leaps on a suspected BOJ intervention, but fails to keep gains by Stocksak

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© Stocksak. FILEPHOTO: This illustration picture was taken September 23, 2022 and shows banknotes in U.S. Dollar and Japanese yen. REUTERS/Florence Lo

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By Vidya Rangeanathan and Kevin Buckland

SINGAPORE, (Stocksak). – The Japanese yen jumped 4 yen for the second consecutive session Monday on suspicion of early intervention by Bank of Japan. However, it struggled with a strong U.S. Dollar to hold its gains.

In early deals, yen reached a low of 149.70 dollars before climbing to a high point of 145.28 minutes later in a move that suggested that the BOJ was taking over for another day. However, the currency dropped to close to 148 very soon.

Ray Attrill, head FX strategy at National Australia Bank (OTC) in Sydney, stated that “it’s blindingly obvious” that the BOJ is intervening. “Dollar yen wouldn’t move like this otherwise.”

Friday’s intervention was confirmed by policy sources as it occurred as the dollar hit a new 32-year record of 151.94yen. This triggered a rally more than 7 times for the Japanese currency, to 144.50 per USD.

Although this was the second instance of Japanese intervention, traders suspect the BOJ may have intervened on other occasions over the past month to support a currency that has fallen 22% against its dollar.

Analysts at Goldman Sachs NYSE: said that the intervention helps the BOJ limit yen appreciation and gives it time to pursue its ultra-low rate policy. This policy is in direct contradiction with a global wave tightening and has widened gap between U.S. interest rates and Japanese rates.

“The yen’s beta to U.S. rates has fallen since the first intervention operation, and repeated intervention steps will likely keep it that way for a while, in part by inducing two-way volatility into dollar/yen,” Goldman wrote last week.

“Though we feel this policy mix is sub-optimal in the medium term and unsustainable, we think it could be in place for a while.”

The dollar was down 0.022% to $0.98588, while the dollar was up 0.063% to 111.87.

Sterling was trading at $1.1343, 0.36% higher than the previous day’s trading. This was due in part to weekend news that Boris Johnson had withdrawn from Monday’s contest for Liz Truss’s replacement. Truss was forced out of office after she launched an economically-oriented programme that caused financial market turmoil.

Rishi Sunak, the former Chancellor of India, has emerged as the clear frontrunner for Britain’s next prime minister.

The Australian dollar was 0.4% lower than the greenback at $0.6370, but was up 0.16% compared to its U.S. counterpart at $0.576.

In cryptocurrencies, bitcoin last rose 2.08% to $19,578.40.

(This story has been corrected in order to fix the fourth paragraph’s garbled words.

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