The yen last week logged its strongest weekly gain since early December 2022 after two bouts of suspected intervention from Tokyo to pull the currency away from a 34-year low of 160.245 per dollar
The dollar was a touch lower on Monday as a weak U.S. jobs report boosted wagers that the Fed may still cut rates this year, while the yen was lower after last week’s suspected intervention fuelled a wild ride.
The yen last week logged its strongest weekly gain since early December 2022 after two bouts of suspected intervention from Tokyo to pull the currency away from a 34-year low of 160.245 per dollar. It added 3.5% in the week.
On Monday, the yen was lower, sliding 0.5% to 153.69 per dollar.
Japanese and British markets are both shut for a holiday on Monday, likely resulting in lower volumes, but with Japanese authorities choosing last week’s quiet periods to supposedly intervene in the currency market, traders will be on high alert through the day.
The more than 9 trillion yen that the BoJ is estimated to have spent to prop up the weak yen last week has only bought it some time, analysts say, as the market still views the currency as a sell.
While Japan clearly has capacity to intervene more, the wider macro environment stays quite negative for the yen, as per Goldman Sachs strategists, noting intervention “success” can only go so far.
But, buying time is still valuable, as it reduces the potential for economic disruptions from the exchange rate adjustment and could stabilise the currency until the economic backdrop becomes more supportive for JPY, they stated in a note.
The yen has been under pressure as U.S. interest rates have jumped and Japan’s have stayed near zero, driving cash out of yen and into higher-yielding assets.
The latest weekly report from U.S. regulators showed that non-commercial traders, a category that includes speculative trades and hedge funds, reduced their yen short positions to 168,388 futures contracts in the week ended April 30, still close to their largest bearish positions since 2007.
