Yen gains strength on intervention fears

The Japanese yen staged a significant rally against the US dollar on Wednesday, sparking speculation of renewed intervention by Japanese authorities. The dollar fell 0.99 per cent to 156.7 yen, its lowest level in about a month.

This surge in the yen’s value comes after Japan likely intervened in the market last week to weaken the dollar and strengthen the yen.

Bank of Japan data suggests a potential intervention of 2.14 trillion yen ($13.5 billion) on Friday, July 14th. When combined with estimates for Thursday’s intervention, the total spending could approach six trillion yen.

Analysts and traders were unsure about the reason for the shift, but suggested that market volatility may be affecting carry trades that had contributed to the yen’s decline.

Hoe Lon Leng, global head of FX flow at Nomura in Singapore, noted, “With volatility coming back, I think that there will be more carry trades unwinding.”

Attrribution: Reuters