USD/JPY approaches 157.00 after falling to 155.70 on likely Yen intervention

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The US Dollar (USD) pares previous losses against the Japanese Yen (JPY) ahead of the European session opening on Monday. The pair is trading at the 156.80 area at the time of writing after dropping about 150 pips in a matter of minutes during the Asian session, hitting session lows near 155.70.

USD/JPY regains lost ground after a sudden drop to 155.70 earlier on Monday.
Yen crosses dropped sharply on Monday on another suspected intervention.
A Reuters report suggests that Tokyo would have spent 5.48 trillion Yen ($35 billion) last week to support the JPY.

The Japanese Ministry of Finance (MOF) did not make any comment, as usual, but the nature of the decline, without any clear fundamental reason behind, and with all Yen crosses acting in the same way, suggests that Japanese authorities intervened in markets again.

Beyond that, Reuters reported on Friday that the Bank of Japan (BoJ) might have spent 5.48 trillion Yen ($35 billion) to support the JPY last week. Japanese Finance Minister Satsuki Katayama warned that Tokyo authorities were ready to take decisive action against currency speculators after the USD/JPY crossed the 160.00 level, considered a line in the sand for the MOF. The Yen has seen several jumps since then.

Markets, otherwise, remain calm on Monday with the focus in the Middle East, after US President Donald Trump pledged to free vessels blocked in the Strait of Hormuz, yet without giving further details on the operation. Iranian authorities affirmed that the critical waterway will remain closed.

In the economic docket, the Japanese calendar is void, amid the Golden Week holidays. In the US, Factory Orders data will open the week on Monday and lay the ground for ISM Services PMI on Tuesday and a slew of employment reports throughout the week, including the key Nonfarm Payrolls release on Friday. Apart from that, a string of Federal Reserve policymakers will provide further insight into the central bank’s monetary policy stance.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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