Yen strengthens sharply against dollar, triggers confusion over intervention

NEW YORK/LONDON/TOKYO :The yen strengthened sharply against the dollar on Tuesday, triggering confusion in the market about whether the Bank of Japan had intervened.

The dollar rose as high as 150.165 yen, breaking the 150 level for the first time since October 2022, before quickly falling to a low of 147.30 as the yen surged.

Traders were trying to sort out if Japan’s central bank had intervened in the market. The 150 level is one that many traders suspect could mark the point at which Japanese authorities, who have reiterated their concern about excessive volatility and currency weakness, could intervene.

“The market is obviously very nervous around these levels at 150. For me, it’s nervousness with traders cutting their long positions,” said Niels Christensen, chief analyst at Nordea in Copenhagen.

“I imagine if this was intervention then they would confirm it to make the most of it. They would follow it up with more to really wash out the long dollar-yen positions.”

A senior Japanese ministry of finance official declined to comment on whether Japan had intervened in foreign exchange markets. The New York Federal Reserve did not respond to requests for comment.

Japan bought yen in September 2022, its first foray into the market to protect its currency since 1998, after a Bank of Japan (BOJ) decision to maintain an ultra-loose monetary policy drove the yen as low as 145 per dollar. It intervened again in October last year after the yen plunged to a 32-year low of 151.94.

“One of our traders thinks it was a bit of price checking rather than explicit action for now but it’s unclear,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets in London.

“Some people might think this was a shot across the bows from the BOJ,” he added.

A yawning gap between rates in Japan and those in the U.S. and other developed economies has weighed on the yen over the past year, as other central banks raised borrowing costs while the BoJ kept rates on a tight leash.