Yen returns to dangerous level for Japanese intervention
The Japanese yen is trying to regain strength this Monday after plummeting to a nearly two-year low of around 160 yen to a dollar following a renewed risk aversion sentiment in the markets. Like the euro, the yen has been under pressure from the surge in oil prices due to the Middle East conflict, higher import costs that could derail Japan’s economic recovery. In this context, traders are favouring the dollar, the ultimate safe haven, since the beginning of the geopolitical conflict in the Middle East especially as the United States is less exposed to energy shock and international trade than other major economic blocs.
The USD/JPY is attempting to bounce back from the 160 zone this morning as the country’s top monetary official intensified verbal warnings to halt the currency’s fall. The Vice Minister of Finance for International Affairs, Atsushi Mimura, told reporters that concerns were mounting over speculative activities not only in the crude oil futures market but also in the foreign exchange market. He added that the government would take decisive action if necessary.
The 160 yen per dollar threshold had previously prompted Tokyo to intervene in the currency markets in July 2024, strengthening the chances of another major intervention if the yen were to breach this threshold for several days. This is further supported by the Japanese Finance Ministry’s approval from Washington to actively strengthen its currency in the foreign exchange market and the Bank of Japan possibly easing its monetary tightening due to new inflationary pressures.
